The gap between consumers and insurance companies is the result of the low levels of trust that consumers have in the insurance provider.
Insurance continues to be a difficult proposition for a layman to comprehend, in terms of assessing his or her individual needs or even the different types of products available. This conundrum partly arises from the fact that most consumers do not immediately perceive the benefit of their policy, as they may not need to file a claim right after the purchase of the policy.
The benefit of an insurance policy lies in its very nature of offering one a vital safety net against financial disaster or financial hardship that can be caused by a family member being wheeled into the hospital emergency room, serious illness, death or the other major risks we all face.
Over the years, in an effort to understand issues in the insurance segment, insurance companies and ancillary segments associated with the insurance industry have conducted several research studies which throw light on the slow, but sure growth in awareness of insurance and its different forms.
A recent consumer research study by LexisNexis Risk Solutions in India revealed several thought-provoking insights into how the Indian consumer views insurance and the attitude towards insurance products, the sales channels and the purchase and claims process. These insights should provide succour to insurers to determine how to ease the concerns of the Indian population.
Based on the responses from 1,900 insured and uninsured people living in Metro and Tier 1 cities (Metro- population Over 1 million; Tier 1 - population 100,000 to 1 million), the survey points out that less than half of those with insurance are very confident that they purchased the right life insurance policy, or believe their policy is very valuable. This percentage drops when one compares the responses among those living in the metros as compared to those in smaller cities.
The level of confidence drops further for those who purchased life insurance directly from an insurance company or through a bank. Around one in five people said they don’t have trust in the way insurance is sold, or the information they’re given, contributing to the large insurance awareness gap.
The research study revealed that insurance agents, friends and relatives often influence a person’s purchase decision for insurance – life, motor or health. While seeking information on life insurance, the results revealed that 76 percent used agents or brokers, while only 39 percent used an insurance company directly, and 38 percent depended on information received via word-of-mouth, 34 percent used direct mail received, 32 percent depended on bank distributors.
Clearly, the gap between consumers and the insurance companies is the result of the low levels of trust that consumers have in the insurance provider and in the advice they are receiving, as well as the language being used in communications. Filing a claim and having trust in the payout is the "critical moment" in the insurance relationship.
Insurance is a financial product that cannot be experienced immediately; and as it is a promise by the insurance company, consumers believe the insurer must fulfill it in the future on the occurrence of a risk event.
So this trust is an important part of the sales process and as the research shows, the way insurance benefits are communicated currently fails to connect with large parts of the population. To reduce the lack of awareness and trust prevalent among consumers, insurers must understand the factors that influence purchase decisions and work towards making those unbiased and simple for all.
An apt solution for consumers in light of these varied information resources would be to compare experiences of friends and relatives in order to arrive at an approved subset of insurance providers.
Additionally, one could also then use the counsel of insurance agents to further determine the right policy that can fulfill one’s needs. These measures will assist people in narrowing down their decision parameters as it involves information on positive experiences and claims that the influencer set provides.The writer is Managing Director, LexisNexis Risk Solutions, Insurance, India.