When the private insurance companies started their operations in 2001, that is a decade ago, there was widespread optimism that customers would benefit out of the competition.
But please tell me about the customer centric innovations that have happened over the last decade. I can think of two major developments.
1. ULIPs was popularized in a big way. In the last few years, roughly 80% of the premium generated by the insurance companies came from ULIPs. And by the way, ULIP was not really an innovation as such plans were available where you could buy insurance and investments together. These plans were sold by LIC Mutual Fund and UTI and the LIC product was called Dhan Raksha.
And you all know how the cost structure of ULIPs was so opaque and high while the entire risk of the investment lay with the buyer. So it was not really a customer friendly development for sure.
The good news is that you and I are more informed and this appears to have an impact on the sale of insurance policies.
The insurance industry is actually showing a slowdown in sales with the premium income being heavily down from last year. The Aug’11 data available on IRDA journal shows Individual single premium as Rs 6466.07 crores as against Rs 17221.25 crores. That’s – 62.45% . The individual non-single premium is a bit better at Rs 13190.67 crores as against Rs 18487.45 crores. This is – 28.65%.
The second development is customer centric but it has not really done well.
2. The availability of online term insurance plans. Aegon Religare kicked off with iTerm and ICICI’s iProtect followed.
This is a huge positive for customers. But have these online term taken off in a big way? Please correct me but my knowledge is that such plans have been bought by less than 25000 people. Though it’s a good start.
Do you ever wonder why these big Financial Institutions, who spend thousand of crores on advertisements, could do better on the customer centric activities?
This post on Harvard Business Review on 5 reasons why companies fail at business model innovation can help.
One reason that I found interesting is the following:
Part of the thinking by line executives in most organizations goes like this: “the last thing we want to do is risk any of our current business. It’s hard enough being at war with the competition in a battle for market share. Why would we want to compete against ourselves?” These sentiments tend to be voiced whenever new business model ideas threaten to cannibalize existing sales. When executives look at new opportunities they see them through the lens of the current business model and view them as competing with the current way the organization creates, delivers, and captures value. Organizations fail at business model innovation because they blindly take cannibalization off the table even if a new business model may have significant upside potential
What are the innovations in the insurance industry in India? What are your suggestions or expectations from the Insurers?
Two reasons to speak up. One, because they must listen to customers. And two, you get what you deserve. If you are not demanding enough, all you get is crumbs thrown at you at their will!
Coming Soon! RupeeCamp "Financial Planning Workshop". "Join us"
Welcome back! Join me on this journey to improving our financial IQ and sharing what we know. Updates at RSS feed or Email. And spread the word please Thank You!