What do young women discuss when they catch up – latest shopping experience, their usual household chores or the recent incident at work, right? On the other hand, the men would worry about the fate of Indian cricket team, foul play in politics, rising inflation and the slow growth of their savings and investment.
India has been consistently recording a very high savings rate year-on-year and it probably is one of the best in the world. But ever thought why is the insurance penetration so low in the one of the fastest growing economies and the second largest populous country of the world? Well most of the veterans in the insurance industry will answer to this by saying – “Insurance in India is sold and not bought by individuals. It is a push product and not a pull product.” In simple words, people are not completely aware of the need for insurance and hence a vast majority do not proactively buy insurance.
When compared to the western countries where there are more than 100 insurance companies’ operating successfully in the same space, insurance is usually bought and not pushed down to the individuals. To a great extent the credit for the same goes to the people themselves, as they are fully aware of their insurance requirements and do not have to be coaxed to purchase a particular product. In India, with only 25 odd insurance companies operating in such a vast space, each of them is still fighting for survival. Out here the agents and the sales executives have to first ‘convince’ the customers that they NEED insurance and then make additional efforts to demonstrate the benefits of various insurance products. To add to this, there would be only a small percentage of agents who are well-trained and equipped to understand the customer’s requirement and suggest the appropriate insurance plan. Most of the time, neither the agent nor the customer is aware of how to calculate the insurance requirement. And off late, with insurance being positioned as an investment tool, it has become difficult to make people understand the core importance of insurance in their lives. The core purpose of insurance which is ‘protection’ has somehow taken a backseat in people’s minds because the need for good returns from an insurance product has occupied the driving seat.
Although some insurance products like ULIPs do have a market exposure and returns-oriented approach, the primary purpose of insurance still remains providing life cover. With the surge of ULIP products in the industry, everyone from customers to agents prefers ULIPs for variety of reasons. Customers want maximum returns from the premium amount shelled out by them and agents want highest possible commission for every product sold. Hence ULIP has become the favourite product of all in the insurance market. There is little doubt about ULIPs being a good product but then one must understand the objective of buying a ULIP. It has to be long-term product and the fund performance needs to be tracked and monitored regularly.
It is always recommended that a first time insurance buyer should always go for a pure term insurance cover of sufficient amount and keep increasing the risk cover after few years. Once the family is secured from the risk of financial loss then s/he can look at buying other insurance products like a money-back plan, pension policy or a unit-linked product.
As the working population in India increases, it is expected that the savings rate and awareness of insurance will also increase. Off late, the insurance industry has also seen big players entering this space like SBI General, L & T, India First Life, Max Bupa to name a few. The existing insurance companies are taking big initiatives to educate the masses about the benefits of insurance. The growth of internet and telecommunication has allowed the insurers to reach more and more people at a comparatively lower cost. Hopefully, in few years from now the awareness about insurance will reach every house and people will be able to buy an insurance policy the way they shop for everyday products.