Not so long ago, buying a life insurance policy meant meeting an agent of the Life Insurance Corp. of India (LIC) and signing a bunch of documents. But with the privatization of the life insurance sector in 2000, there is now an array of life insurance products that are promoted with innovative marketing - from bancassurance, or distribution from banks, to a sale through a broker - the sale conduits are varied.
Despite these aggressive and innovative marketing strategies, word-of-mouth still remains one of the most popular ways a particular insurance policy is popularized, and eventually sold.
The Invest India Incomes and Savings Survey 2007, released by IIMS Dataworks, a Noida-based retail finance research firm, shows that social networks are very effective in reaching out to potential customers. Around 25% of customers sampled for the survey report being influenced by colleagues at work, and 36% followed the advice of friends and relatives. In case of LIC, the corresponding figures are 18% and 32%. As of March, LIC had a 70% market share in the life insurance business, as compared with private insurance companies that have 30% of the market pie.
A senior insurance industry executive says although bancassurance and agents play a crucial role in marketing policies, much of the credit when a policy deal is closed goes to recommendations made by friends and relatives.
“Some of the private life insurance companies are very slow in settling claims,” says S.K. Sethi, vice-president and director of Insurance Brokers Association of India (Ibai). “They will soon bear the brunt of this carelessness in terms of reduced business.”
Life insurance companies say that a lot of their business comes through bancassurance and agents.
“Insurance distribution through banks is also one of the most effective ways of distributing policies,” says Vivek Khanna, director of marketing, Aviva Life Insurance Co. India Pvt. Ltd. Around 65% of Aviva’s business comes from bancassurance, while direct sales comprise just 35% of the total sales. The IIMS survey says banks influence one out of five potential private insurance customers in their choice of a private life insurance provider.
“While advertisements and printed material serve as information for the product, the influencing factor in buying a life policy remains the human interface,” says Vikram Mehmi, president and chief executive, Birla Sun Life Insurance Co. Ltd (BSLI). “Intermediaries are powerful influencers.”
While private and public players are aggressively overhauling their marketing thrust, Manpreet Singh, a 42-year-old corporate general manager of Eastern Medikit Ltd, a Gurgaon-based medical supplies company, says without good service no company can earn word-of-mouth publicity.
Singh says his father-in-law died in February 2007 and since then he has been struggling to get the claim amount from BSLI. “After a thorough medical check-up from a BSLI panel hospital, my 66-year-old father-in-law took a policy for himself with his wife as a nominee,” he says. “He died in February 2007 because of a brain haemorrhage. After giving me the runaround for several months, the company refused to pay the claim amount on the ground that my father-in-law had diabetes and hypertension.” Singh says he now is determined to take up the case in a consumer court.
IIMS data shows that trust is an important consideration when selecting a policy. The report states that 42% of insurance customers mentioned trust as an important factor in their insurance purchase.
Despite the new glut of insurance offerings, India still ranks low in terms of insurance penetration. According to global insurance data from Swiss Re, one of the world’s largest insurance providers, although the insurance penetration in India has risen from 1.77% in 2000 to 4.17% in 2006, it is still much lower than the developed markets of western Europe, the US and the UK.
“Our company has focused its attention in a few rural areas and has seen gratifying results, says Sanjay Tripathy, marketing head of HDFC Standard Life Insurance Co. “The company has issued over 121,000 policies, accounting for more than 23% of all policies issued during 2006-07.”
But Tripathy’s views are not shared by all in the business. “Private insurance companies mostly capture customers in higher income bracket and that gives them more visibility in big cities than small towns and villages,” says Ibai’s Sethi.