Understanding the root-cause of any problem is primary activity which any individual has to solve before tackling a problem. The same approach has been adopted, to evaluate few of the key challenge faced by Indian insurance industry.
A market research, activity was carried out to understand the insured perspective on the Indian insurance industry. This was essential because, the policyholder’s are the consumers of the services rendered by insurance companies; this market research finding provides us the insured perception of the insurance companies and tries to answer the following questions:
- What are the actual expectations of the insured from the insurance industry?
- What is the current level of customer satisfaction?
- What is the current Market share of individual products available in the market place?
- What has been the Agents role in insurance industry?
- Are the customers looking into ICT to explore the insurance industry offerings?
- What has been the perception of insured in regards to premium payment?
- How familiar are the insured about the policies of the insurance products?
- How confident are the insured on the insurance companies?
- Are insured confident that insurance companies execute the claims settlement process if any claims are made?
- How the insurance perception varies with the demographic attributes of the insured?
- Whether the products have been matched with the featured needs of the insured?
The questionnaire was designed to capture the interest of the insured both in Life and General insurance. In General insurance, Motor insurance was taken for the sample study because the motor insurance share in general insurance is higher when compared to its other counterparts like Fire insurance, Marine insurance, to name a few. There were five sections in the questionnaire, where in the first section being the opening section, which directs the respondents to respond to the Sections A and B, Section A, contained all questions related to General insurance; Section B, contained all questions related to Life insurance; Section C, contained the common questions related to both General and Life insurance. The last section is the closing section which captures the demographic information of the respondents.
Total of 60 respondents were surveyed online and convenient sampling technique was employed. The rural segment of India is not taken into sampling space, only the urban population is considered in the sample space.
1.1 Findings of the market research
The survey results has been analysed and its details are as follows:
India is an emerging economy and current automotive sales amounts to 7.6% of the GDP this is mainly due to the per-capita income of individuals is increasing, because of which the people of India are left with substantially surplus of the amount out of their earnings, and people are able to afford vehicles; unlike the developed economies where the public transport system is well designed, in India such facilities are yet to be standardised and made convenient to people. So, there is high rate of growth in this sector eventually, enabling the business opportunities to insurance industry as well.
Chart 1: Type of vehicle possession
The life insurance industry has few product-mix, from the graph below we can infer that the product money back policy has the highest share in the market. On a contrary the pure insurance product the term plan, shares one of the least market shares. In the survey 3 out of 4 of the respondents were in age group of 18 – 22 years and they dint have any life insurance plans, only one of the respondent in the age group of 43 – 47 years dint have any of the life insurance product. We can infer that the insurance penetration in the urban market is quite high. Further, the investors prefer the policies which meet the investment opportunity of the insured.
Chart 2: Type of Life-insurance possession
The Motor Vehicles (MV) Act, 1988 mandates payment of compensation to the victims of accidents arising out of the use of a motor vehicle or motor vehicles, in public places by the owner or owners, as the case may.
The MV Act further provides that no person shall use a motor vehicle in public places without a policy of insurance complying with the requirements of the MV Act. The Indian jurisdiction emphasises various measures to ensure that vehicle users always carry valid insurances all the time. This is validated in the survey, the below graph shows the compliance level of vehicle users with insurance law enforced. Out of the 6 commercial vehicle users it was found to be that 3 of such users don’t have valid vehicle insurance. The default level is higher in case commercial vehicles is highest followed by two-wheelers and in case of private cars no such defaults in the survey were encountered, nonetheless, the least level of default levels can be observed in private cars category.
Chart 3: Type of vehicle possession
Chart 4: Vehicle insurance possession
The very basic nature of the people of India is that they are conservative in nature, Motor insurance is not laced with any of the investment plans, its a pure risk cover. Hence only 7% of the motor insurance policyholders agree that premium paid on their vehicle insurance is not high. 47% of the respondents say, that they pay slightly on a higher side. Whereas, 38% of the policyholders, say they pay high price for their vehicle insurance.
Chart 5: Premium perception
When looking at the perception of the insurance companies being liable to pay for the accident causes, it was observed that 25% of the respondents said that insurance companies are 100% liable to pay for the accident caused by policyholder, but, in reality, some portion of the claim amount nearly 10% of the claim amount is bearable by the policyholder in the form of deductable. We can see that the data recorded exhibits skewed distribution of the perception, we can infer that the policyholders are not well aware of the liability clause in their policy document, further, when settling vehicle insurance claims, there are various parameters like depreciation, metal and non-metal parts, etc, these parameters when used becomes difficult for laymen to understand the actual claim settlement value and it doesn’t provide the true claim settlement amount so, this might be one of the main reason for such a perception.
Chart 6: Insurers Liability perception
The majority of the policyholders are looking insurance products as an investment tools, high percentage of the people have invested in the insurance sector through Endowment plan, money back policy; we can also observe that, due to the current market instability in the secondary market, not much of the policyholders have selected ULIP based products. From this, we can infer that Life insurance policyholders perceive insurance industry as not only as a pure risk covering instrument but, also as an investment tool. Hence, risk cover along with investment factor if provided to the policyholders, the market share of such products can increase in the market place.
Chart 7: Type of life insurance plans possession
Chart 8: Insurance as an investment tool
“Insurance is a subject matter of solicitation” the dictionary meaning of Solicitation is “To Ask For”. Hence insurance is a subject that needs to be asked for, by the consumers. This implies that the customers have to discuss with an Insurance Advisor regarding suggestions and professional advice suggest the right insurance products and services specially tailored or customized to meet an individual’s requirements. Hence, in short, it must be understood that Insurance Products and Services should not be SOLD but Solicited by the Consumers. It’s of much relevance to consumers as it enthrones the responsibility for identifying, choosing and selecting the appropriate insurance products and services on the consumer rather than focussing on the Insurance Company. It must be remembered that “Customer’s participation in availing the insurance products and services are purely on voluntary basis “.
As a Consumer, while availing Insurance Products and Services, the following points should be borne in mind as enlisted below:-
- Understanding customization of Insurance needs and requirements
- Meeting a professional insurance advisor
- Identifying, Choosing and Selecting the right Insurance products and Services from a wide array of mind-boggling products
- Signing the contract
From the survey its very significant that, majority of the policyholders i.e. 70% of the respondents are not aware of the insurance products which they have brought, this equates to not being aware about either their insurance requirements or the various options available in the market before them.
Chart 9: policyholders behaviour at the time of buying the insurance policy
Consumers of insurance industry in India are empowered by various legal bodies which try to address the consumer’s grievances. Few of such legal entities are Grievance cell of IRDA, Insurance Ombudsman, Consumer Disputes Redressal Agencies set up under the Consumer Protection Act 1986, Director of Public Grievances under Govt. of India, are some of the important grievance redressal machineries. Further the safe guards in the interest of insurance consumers, in the form of standing instructions have been provided, for compliance by insurers, under IRDA’s Protection of Policyholders’ Interests Regulations, 2002. Despite all these measures taken by the government, people are not empowered by this knowledge; this is also depicted in the survey, wherein, almost 65% of the respondents have 0% to 50% confidence on life insurance industry in respect to claim settlement.
Chart 10: policyholder’s confidence level on Life Insurance Company.
Looking at the distribution channels, agent acts as an intermediary between the insurance company and its customers. From the survey it’s evident that almost 60% of the respondents say that agents don’t employ hard sales strategy to convert a prospective customer into policyholder. On the contrary, almost 40% of the respondents say, that agents employ hard sales strategy.
Chart 11: Policyholders perception on agents
Looking at the Internet and Communication Technology penetration in India from the survey it’s evident that almost 87% of the respondents haven’t used the ICT instead they prefer traditional methods to meet their requirements.
Chart 12: ICT awareness
Understanding the processing time involved in awarding a policy to the applicant, it’s evident from the survey that 33% of the respondents feel that insurance companies take quite long time to process the application further 85% in the 33% of such population represent the applicants in age group of 18 – 32 years, this segment of the market represents the prospective customers for the insurance industry in the timeline of next 20 – 40 years to come. The processing of the application has to be faster, currently lots of human intervention is needed to realise the same. If the STP – Straight Trough Processing – is adopted by the insurance industry, the amount of human interventions can be reduced and faster processing of the applications can be enabled.
Chart 13: Policyholders perception on insurance application processing time
Currently no common database is shared among the insurers in India. Each of the insurers has their own database and the law also enables the policyholder to mobile port their policies from one insurer to the other insurer. In such cases, substantial amount of time is consumed and much of the time is consumed in processing the paper work. A medium which is a common database shared among the insurer should enable and ease such transactions in Insurance industry.
Chart 14: Perception on document procedures
Personal information section:
The demographic information of the respondents is as summarized below:
- The sample space included the respondents of all age groups.
- The survey also sampled the opinions of both the genders, and marital status in the population.
- Since, the survey was done in urban place, majority of the respondents were found to be literates.
Chart 15: Demographic information of the respondents: Age
Chart 16: Demographic information of the respondents: Gender
Chart 17: Demographic information of the respondents: Marital Status
Chart 18: Demographic information of the respondents: Number of Children
Chart 19: Demographic information of the respondents: Qualification
1.2 Suggestions for improvement in the process
It is evident from the market research survey that, the policyholders have bare minimal knowledge about the policy they hold. Its mainly due to the fact, that the insurance business has been operating through intermediaries, further the sales level set the sales team is quite high, so, the intermediaries or the sales personal doesn’t provide enough information to policyholders. In today’s age, where cut-throat competition has become the order of the day, insurance advisers take up the role of pure selling machines trying to “close” the sale and achieve the targets as set by the Insurance Company rather than providing “professional advice” to their customers. Insurance companies put pressure on their agents to achieve their targets and often deviate from the basic dictum that drives the Insurance business. Majority of the policyholders perceive the insurance industry to be a set up where in they don’t furnish the indemnity clause at times of claims. This leaves with the enormous uncertainty among the policyholders and the insurers, wherein, the policyholders might employ illegal medium to cash their fortune through fraudulent claims and on the other hand, the insurers failing to convey the actual benefits to the society at large. This gap between the insurers and the policyholders can be mainly bridged through the proper knowledge discrimination channels, looking back at the methods employed to discriminate the insurance benefits to the society, its very primitive, measures has to be taken to channelize to communicate the actual benefits of the insurance to the society at large. If people are empowered with this knowledge and proper understanding of the benefits of the policy they hold, we can see a much brighter figures of sales in insurance industry. Thus the consumers have to obtain professional advice and help from a trained insurance advisor who “advises” the clients and then helps them to identify, choose and select the Insurance product and Services suited to such individual.
Lastly, the adoption of the ICT is very minimal in insurance industry; the centralized database to share the common fraud related data, the details of policyholders, the claims history etc should be enabled to reduce the loss due to leakages and frauds. Currently, IRDA has setup a body called Insurance Information Bureau – IIB – which maintains such common database which can be shared across the insurance companies; this setup has to be brought into full operation at the earliest. The ICT channels should also enable the knowledge decimation to the customers.
Disclaimer: Only for educational purpose.