Smart Indian Consumer? Not really, when buying life insurance products


Here are the ten most important things you should do before signing the life insurance proposal form

Chandramohan Mehra 
 

Globally, it’s a well-acknowledged fact that Indian consumers are Smart - marketers call them value seekers. At home or abroad, when shopping, an Indian is looking for the best deal in terms of maximising his perceived price-value output from the object of his desire. The purchase decision precedes detailed understanding of the product’s functionality, durability, features, performance rating, warranty, fit, colour and customisation. This customer behaviour is true for almost all product categories and relevant across socio economic segments. In many categories, the average consumer is far more knowledgeable than the front-end distributor.

Average ticket size of a life insurance policy is Rs. 20,000 of a regular premium product whose premium is payable every year through the entire policy term averaging around 12 years. Compare the purchase behaviour of a 35-year old, and involvement of family perhaps, when he buys a shirt, whose price would be less than 1/10th that of annual average premium of a life insurance product. Compare the time and effort invested for both purchases, shirt vis-à-vis life insurance policy. 
 

Unfortunately, when it comes to buying a life insurance policy the typical reaction is, “Where should I sign on the proposal form, is all I want to know”. This reaction is true for customer segments across income and education dimensions. The harsh realisation occurs few years down the line when the policyholder understands that he had originally signed for a regular premium product, which is now lapsed. Casually signing proposal form, the policyholder mistook the product to be single premium plan. 
 

The life insurance industry has done a commendable job in terms of educating and sensitising Indian population towards the need for adequate insurance cover, planning for child’s future expenses or building for respectable post retirement life. 
 

However, there continues to be high customer inertia when it comes to understanding few basics about life insurance before the policy buyer commits his hard earned money for series of years. This inertia is one of root causes for increasing dissatisfaction, grievances, high surrender rates and policy lapsations. A sizeable chunk of policyholders are paying the price of mere inertia and sheer laziness. The industry too has taken a beating. The life insurance industry net premium influx is far worse than the consistently negative new business growth rates in the recent years.

  • Here are the ten most important things you should do before signing the life insurance proposal form. 
  • Analyse and ensure that the plan meets your insurance needs and long term financial goals. 
  • Check the plan type. Is it market-linked or traditional? If it’s a market linked, be aware of the risk associated it. 
  • Be clear if it is regular or single premium plan. 

Understand the risk factors, terms and conditions of the plan. Read the sales brochure carefully. It’s far simpler to understand it than the electronic gadgets with which we spend enormous effort and time to familiarise every feature irrespective of its usage relevance.

 

Confirm the premium payment term and premium amount, which later you may find it higher or lower in context of likely changing income and goals through the policy term.

  • Check the benefit illustration. 
  • Confirm the tenure of the plan. Make sure it is appropriate. 
  • Understand the benefits available under the plan – before and at maturity.
  • Check the lock-in period and applicable surrender charges.
  • Provide true and complete information in the proposal form.

While the industry is enhancing transparency, disclosures, beefing up training of distributors and customer education, the customers too will have to demonstrate their savvy-ness and raise the delivery standards, which they have successfully done in other product and service categories. Not just big savers, but we can also be smart savers.

The writer is Head-Brand & Cross Sell, SBI Life Insurance.

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