What makes a financial product different from a car, TV or any other consumer items?
The most important difference is that while a Car is bought, an insurance policy is sold.
Moving on, the most plausible reason, I can think of, is that every Uncle/Aunty/Kid in the neighbourhood and family knows when you buy a car, microwave, etc. But what when you buy insurance?
Consumer items enjoy what I will call a “Social Transparency”
My friend/buddy (we’ve known each other from Std. I), told me how he got sold on to ULIP a few years back. Even though he knew that I knew a lot about insurance, he didn’t bother to check with me. To this date, I have hardly helped any of my friends and relatives about their insurance decision even though I could be a trusted guide. Some of them did check out if they had made a right decision, though!
And then, the competition between the Retail Resellers in the consumer items is very huge and they will not like any adverse publicity.
But competition is there in the Insurance industry too, you would argue.
Yes, but by promoting ULIPs and not term insurance, the Insurance companies are not selling the best product that is available for the customers. So competition is not really helping the consumers, I would venture to say.
Ideally, the internet and the competition should help buyers make more informed decision about their insurance cover. But hiding behind the jargons, the information asymmetry is refusing to budge!
Will more of social transparency help? What do you think?
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this is a very good writeup on insurance
Regards
Rakesh
http://www.forum4finance.com
Despite of the private players in the market most companies have not even been able to break even and that is a concern for them and not social transparency.
@Meeteshlodha Agree that social transparency is not the Insurer’s concern. But it should be our (buyer’s) concern, atleast