| Life insurance in India has undergone tremendous
changes in the last two years after the government opened up the sector.
What seemed unthinkable a decade ago has become a reality now: more
than a dozen companies—many as joint ventures with the best known
names globally—are vying with one another for the customer’s attention.
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| The opening up of the sector has provided the customers
with choice, competitive pricing and world-class service. Several
people had predicted a rapid decline of the state-owned entities while
several others said they would change their ways and hold on their
own. What does the scorecard look like now? |
| A recent review disclosed that in 2001-02, all the
private sector companies together had secured approximately 1.3 per
cent of the total life insurance business. This by itself may look
modest. It is however, an encouraging performance because it is only
a year since the new players have entered the field. Many had operated
only for part of the year. |
| Life insurance is retail in nature and growth comes
slowly. It is still a face-to-face business based on individual contact,
familiarity and comfort. The right kind of growth, not the aggressive
one, is the preferred option. Looking at other countries’ experience,
it would remain so for quite a while. In fact, rapid growth creates
problems with an impact on capital. |
| Awareness of insurance is very low in India. Life
insurance penetration—the total annual premium income in the market
as a percentage of the gross domestic product—is a low 1.3 in India
while it is 7 in the United States and Britain. If we are able to
raise this figure to three in five years, the annual premium would
be Rs. 60,000 crore. Even modest percentages of market share would
involve large volumes of premium, funds, investment and, in due course,
distributable profits. |
| Selection and training of agents are going to be
an important differentiator between insurers. Casual appointment of
a large number of agents has given way to increasingly careful selection
with an eye on high retention rates. The new players, including my
company AMP Sanmar, are uncompromising on their quality parameters
in their agents’ selection. The increased media attention and specialised
reporting have also kept the companies on their toes. |
| What does it mean to the customer? The market has
already seen a variety of innovative products such as single premium,
individual pension, equity-linked insurance, limited payment options
and riders. Another significant change is in visibility: advertisements
have made common man sit up and take notice of this emerging industry.
I do not recall a time when life insurance, or any form of insurance,
received such attention. This should lead to more people buying many
forms of insurance, resulting in a high penetration level. |
| The new companies have set fresh benchmarks for
service in terms of time taken to issue policies, respond to queries
and settle claims. They also have higher limits for policies that
will be accepted without medical examination. The sector has transformed
itself from one of total non-communication to one of total communication.
For the first time in decades, the customer has become the centre
of attention. |
| The Insurance Regulatory and Development Authority
has taken steps to protect investors’ rights. The policyholder has
now the right to review within 15 days the decision to buy a policy.
There are regulations that monitor advertisements, marketing and agents’
material. These steps will ensure that the customer is not made to
buy products on wrong or false promises or information. The quality
of information given to customers has risen manifold thanks to the
high standards set by the new entrants. Attractive brochures in simple
language and clearly worded policies and promotional material are
now made available to the customer. |
| In conclusion, customers are sure to see a more
professional intermediary force in the future. They will also get
an excellent opportunity in terms of offers, choices and prices. |
| An article by S V Mony, Chief Executive Officer,
AMP Sanmar, reproduced from ‘The Week’ dated August 25, 2002. |
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