Last Updated : Apr 21, 2018 01:40 PM IST | Source:

Do we really need 776 life insurance products?

As of March 31, there were 587 individual products and 189 group products available in the Indian market.

M Saraswathy @maamitalks

Seven hundred and seventy six! That is the exact number of products to choose from in the life insurance sector in India. But the real question is, do we actually need that many?

Data from the Life Insurance Council has shown that as of March 31, there were 587 individual products and 189 group products available in the Indian market. Among these, 557 individual products belonged to the private sector and 30 to Life Insurance Corporation of India (LIC).

Unlike products of other financial service providers, insurance continues to be a push product. This means that it is necessary that a distributor visits the prospective customer and make an attempt to sell.

Being a fairly complex financial instrument, sales require at least 3-4 personal visits to convince an individual to buy a policy. Having multiple products only complicates matters further, leading to confusion among the target population.

For one, insurance policies are filled with jargon, like internal rate of return, net asset value, surrender value, sum assured, benefit illustration, fund switch, among several others. TS Vijayan, the former chairman of Insurance Regulatory and Development Authority of India (IRDAI), had, in fact, said at an event that even he could not sometimes understand the way policies were worded.

Secondly, merely adding products to the portfolio to stack up the numbers may not result in actual sales. Industry sources told Moneycontrol that even though companies have 20 products on an average for individual customers, only three or four of them bring in the lion's share of sales.


Thirdly, companies also tend to have multiple products in one category. For example, is it necessary to have five me-too products in the term insurance space by one company? Probably not.

Launch and maintenance of an insurance product also requires significant investments from a cost and technology perspective. Doing away with products that do not sell by phasing them out gradually from the market could be a good start.

While the regulator has also discouraged companies from filing too many products and limited it to five a year, the existing products themselves offer an array of options to the end customer. The pertinent question that each insurance company could introspect on could be about what differentiation they could offer in products that would attract customers to buy.

Considering India’s huge population and limited insurance penetration, a small set of simple products with easy-to-understand features is the need of the hour. These needs could well be addressed by a few meaningful products from each of the insurers, rather than the hundreds that are lying unsold.
First Published on Apr 21, 2018 01:40 pm
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