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Increasing coverage and higher acceptability among masses, insurance is still not a fully understood financial product resulting in over or under insurance, improper product selection and poor penetration. Further, mis-selling by agents is still rampant despite companies taking steps to stop such practice. To get the status of the industry in changing business environment, Rahul Trivedi, Senior Reporter, Money Mantra, spoke to Kapil Mehta, Managing Director, SecureNow Insurance Broker Pvt. Ltd. Excerpts:
How has insurance industry changed over last three years?
The past three years have seen extraordinary changes in the sector.From a customer’s perspective, life and health insurance products have been standardized and become moreuser-friendly; realistic product illustrations have been made mandatory. From an insurer’s perspective, third party liability has been streamlined. From distributor’s perspective the screening criteria to be an intermediary has been strengthened. Finally, there have been several changes to eliminate non serious players from the market.Further, there is a significant improvement in customer awareness and education.
There were lots of complaints about mis-selling by agents. Do you think scenario has improved now?
Grievances being reported are steadily increasing. Over 4 lac grievances were registered in the previous financial year. Issues related to unfair business practice were particularly severe. This is a positive sign. Previously complaints were not being brought to light. Today an aggrieved customer can escalate their issue within the insurance company, complain to IRDA, approach the
Ombudsman or knock on a customer forum. I have seen several cases where customer complaints have been well addressed. If you read the ombudsman judgments, it is clear that customer orientation is high.
With awareness in urban India increasing about the term insurance products are you seeing more demand for term products?
I see a strong demand for term insurance. In our own portfolio we see a 100 per cent increase in term insurance. This is spurred by three major factors – increasing awareness about the real purpose of life insurance, rapidly declining term insurance rates and the sale of term plans on the internet. The level of absolute cover still remains low. People should purchase 10 times their annual income as term cover. In practice the cover is just about a year’s salary for most individuals. As per Swiss Re, over 60 out of 100 people in the US own a term cover, in Australia over 15. That number is less than 1 per 100 in India. We have a long way to go.
Online insurance has picked up over last two years. Do you see it as a serious challenge to the agency model?
I see online channel as a strong complementary channel to Agency and Bancassurance. Online is best suited for pure protection products such as term life and general insurance. These are products that are less attractive for agents or other intermediaries because of the relatively low commissions embedded in them. Over time, I expect agents to become more skilled in selling large value term insurances or in adapting to assisted-online sales.
What are the trends you are seeing in the B2B insurance space?
The B2B space is underserved. Companies are not buying insurance intelligently. Even in large organizations there is a fundamental lack of insurance understanding. Rates are not negotiated hard enough. For all practical purposes
smaller companies are uninsured. The penetration of general insurance (which is largely B2B) is a paltry 0.8 per cent of GDP in India compared to the world average of 2.8 per cent. The opportunity for improvement is therefore. I find a large number of companies considering medical insurance for their employees. This is because group medical insurance offers benefits that cannot be matched by individual products. Specialized products such as liability insurances are also growing steadily. Another striking aspect of the B2B market is the strong presence of public sector insurers. Public sector insurers have unparalleled reach and often able to pick up risks that the private sector cannot.
Alot of times people choose family floater plan as it is cheaper as compared to the individual plan. What is your take on it?
A family floater plan is best when the age of the two senior family members is close and everybody is in good health. This is because the pricing in family floater plans depends upon the age of the oldest person and if there is a significant age difference then a person may be better off buying individualAlso, if one person in the family has ill health then the insurance for the entire family can get rejected.
What are the main clauses on should check while buying insurance against fire and burglary?
For fire, the most important things to check are that allied perils such as earthquake, flooding and malicious damage are also covered. Further, the basis of cover should be reinstatement rather than market value. This ensures that insurance will pay to get your property back to its original shape rather than a pay you the depreciated value of the asset. For burglary insurance make sure that the items are accurately valued and that theft is also covered. In insurance parlance theft does not involve forced entry which has a higher probability of occurrence.
Why should a company or an individual buy from SecureNow? What are the key benefits of buying from SecureNow?
SecureNow’s focus is on selling insurance to businesses. We provide employee benefit, liability and property covers. There are five benefits of purchasing insurance through us. First, we are an insurance broker and not tied to any one insurer. Practically, we have the company’s best interest in mind and force competition between insurers. Second, we have a deep understanding of the
subject matter. We understand industry sectors and insurance features that are most relevant to companies. Our team has excellent credentials. Third, we focus on SMEs, which is a neglected sector even though their insurance needs are fairly substantial. Fourth, because of our scale and knowledge, we typically reduce insurance costs by 20 per cent or more and structure insurance such that claims are effectively paid. Finally, we provide a one stop shop for all insurance needs and servicing.