Are private insurance companies reliable?
Enter private insurers with an altogether new agency force, all ready to hawk freshly designed insurance policies. And the market scene - a government owned established insurance entity -the Life Insurance Corporation (LIC) with a field force of over 6,00,000 agents and more than 80 products to choose from.
Its almost a year since private insurers began their operations. In a scenario where LIC called the shots all these years, how far have private insurers been able to make inroads after almost a year since the opening of the sector. And are their sales force (called life advisors or insurance consultants) successful in pushing their products inspite of the security factor -the ‘government guarantee’ label attached to LIC products - Insuremagic makes an attempt to find out.
To an audience who spelled insurance as LIC, the initial breaking-through by private insurers was not an easy task. Being in the insurance business for about 50 years, LIC had already carved a name for itself in the Indian psyche. Insurance being a long term contract, an established name means a feeling of security and more importantly LIC policies come with the safety tag - the most touted government guarantee. So how easy is it to break the mold.
Says a private insurer’ spokesman “Initial apprehensions are bound to be. But slowly times are changing. People are open to tailor-made products ” Most of the individuals approached by private insurers were existing LIC customers. But ask them what made them buy insurance and the reply is ‘for tax purposes’. The need for insuring ones life after evaluating the growing requirements over a period of time was never felt.
Blame it on the lack of information available then or the agents who were more keen on higher commissions than educating prospects. Which is why not much thought was given to choosing the right risk cover. “Today it is observed that either most of the prospects we have approached are underinsured or the risk covers bought by them do not suit their needs” says an insurance advisor.
While it is difficult to match the number of products LIC has, private insurers have come up with products that allow mix n match and combinations that can be worked out to suit individual requirements. Sadly LIC products allowed little flexibility. But today with the concept of riders catching up LIC has decided to offer term assurance rider to those taking the revised Jeevan Dhara product.
Competition, no doubt is getting rife. Private insurers are concentrating on need based selling. “Instead of pushing policies down the throat we educate the customer and offer guidance on how much insurance the individual needs, an approach that is slowly paying off,” says an insurance advisor.
Consider the fall in returns on almost every investment avenue today. Comparatively insurance as an investment offers a lot more in terms of returns, risk cover as also the tax concessions and added bonuses. But look at LIC products offlate - the returns on a number of policies have been revised downwards. So where is the concept of guaranteed returns? ” asks an insurance consultant of a well known private insurer.
Private insurers are playing it safe - not assuring any guaranteed returns. But how economically are the new wares priced? “Price wise the difference in products is marginal. Buying riders may mean paying a little extra but check out the benefits offered and its more than worth the price” says an insurance advisor.
Talk of providing customer service - an hitherto neglected area, and private insurers realized it is an area they could score over the behemoth easily. LIC with the entry of private insurers flagged off a mass computerization drive that would connect each of its branches across the country to facilitate among others premium payments online.
Considering the reputation LIC has built over a period of time attached with the most saleable tag of government guarantee, and the deep- rooted loyalty reposed in it is comprehensible which manifests in its policy sales.
‘Private insurers have been able to make a dent in the market in the first year of their operations garnering a market share of a mere 0.02 per cent of the Rs 36,070.4 crore market says an LIC agent. And four private life insurers together have sold 10,000 insurance policies during the first year. Comparatively LIC issued two crore risk covers during the said period inspite of the entry of private insurers, including 3.45 lakh new annuity policies’ says the LIC agent proudly.
For private insurers the first year has been well begun. The insurance sector claimed more newsprint than any other and with tailor made policies, riders/add-ons, publicity campaigns etc the interest has caught up considerably. The awareness building exercise undertaken by private insurers has paid off. But will they honour the promises made by them in the long run is a pertinent question in several minds which only time will say.
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