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Embedded Value: Informed purchase easier on digital platform


The terms and conditions are enumerated in the policy bond which is subsequently issued as a proof of the contract between the insurer and the policyholder.The terms and conditions are enumerated in the policy bond which is subsequently issued as a proof of the contract between the insurer and the policyholder.

VERY FEW PEOPLE understand what life insurance tool can do for them. Some look at it as a compulsory savings plan for risk cover while saving on income tax outgo. Unfortunately, very few people understand and appreciate the power of this unique risk mitigating product which makes it very different from pure saving schemes. But several factors associated with the product features, terms and conditions make buying the right life insurance policy a difficult job.

Access to life insurance
Life insurance companies do not have offices in every market or colony, hence stepping into an insurance office is not as easy as it is to enter a bank which is generally a neighbourhood entity. Non-availability of such an establishment nearby is the first hindrance in buying life insurance. This factor alone puts off a vast number of potential first- time customers. The second option is to look for a life insurance agent through some contacts. Though there are around 20 lakh agents, it is almost impossible to contact one who can visit the customer at a time convenient to him. Severe deficiency in training of the salesforce leaves potential customers inadequately informed, while being urged to issue a cheque to buy a policy.

Forced selling
This results in forced selling, leaving the customer dissatisfied. Euphemistically, such a transaction is termed as miss-selling by the insurance regulator and the insurance companies but I would call such activities nothing but a fraud for which along with the intermediaries the insurance officials are also a party. Therefore, the potential policyholders find it very difficult to choose the right plan, with tenure and sum assured suitable to their financial capacity and protection requirement.

The next option is to buy a policy through the bank. However, the bank manager can at best set up a meeting between the person willing to buy insurance and the insurer’s representative but none in the branch would be willing to serve a customer desirous to know about insurance.

Digital marketing
In order to remove all such difficulties, insurers now provide their products online. They take help of insurance aggregators, the licensed entities, who provide comparable information to the prospective buyers about various products. Products with full detail are also available on the website of each insurer for online sale.

After the Covid-19 setback the insurance regulator has also simplified many procedures to give a boost to digital marketing. This channel provides full transparency to the prospective buyer so that she can take an informed decision. However, the industry is still far away from world-class user experience and fintech companies have a major role to play in enabling prospective customers to feel equipped to make the right choice with ease and confidence.

People need to be aware that insurance is a contract and not just another state-run welfare scheme. Signing of the proposal form and paying the consideration amount does not commence the contract. Proposers may have to undergo extensive medical examination as per requirement of the insurer for particular age at entry and sum assured. The contract comes in force only when an insurer accepts the risk on the basis of information called for and furnished in good faith by the person seeking the insurance cover. The acceptance is documented in the shape of the first premium receipt cum acceptance letter. The terms and conditions are enumerated in the policy bond which is subsequently issued as a proof of the contract between the insurer and the policyholder.

Insurers must continuously work for creating awareness about the importance of life insurance and the steps one must take to buy a suitable plan for herself through a very well-trained sales force. Innovative tools to ensure ease of buying must be invented, sooner the better.

The writer is former MD & CEO, SUD Life

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