Unless made mandatory, selling mini-insurance plans across categories has been a slow-starter
A slew of life and general insurance companies have brought out bite-sized insurance products to be pocket-friendly. These include plans that are priced less than Rs 1,000 per annum and offer sum assured of Rs 1 lakh-5 lakh. However, the real question to be asked is whether this will make an impact on the sales.
The Swiss Re sigma report released in July 2019 showed that the insurance penetration in India (as a percentage of the country's gross domestic product) was 3.7 percent in FY19 (compared to 3.69 percent in FY18).
Similarly, the insurance density stood at $74 (Rs 5,110 approximately) per person in FY19, compared to $73 a year ago.
There have been government schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana, PM Suraksha Bima Yojana and PM Jan Arogya Yojana. But, these have not been sufficient to increase the penetration and density levels of insurance in the country.
A common grouse is that individuals still consider insurance as an option and not a necessity. Only when insurance is mandated (example: motor third-party cover), do individuals willingly buy a policy. Unlike a bank account or even mutual fund SIPs that are seen as a fixed investment, insurance is a push product.
At this juncture, an innovative alternative to the current insurance would be having small-sized policies with a limited validity. Bundled with other purchases or sold as a standalone product, this could help increase awareness about insurance.
But, there are practical difficulties. Since insurance is not as aspirational product unlike gadgets or clothing/accessories, it would be difficult to convince customers to buy a policy.
A classic example is the travel insurance product that is bundled with airline tickets. Unless it is an international trip, especially to Europe where insurance is mandatory, customers conveniently un-tick the insurance option.
Secondly, the renewal of these products would be a challenge. Even if an individual ends up buying an insurance product in the first year, convincing them to renew it would be an arduous task. Hence, persistency levels will be impacted.
Lastly, since these are expected to be one-click purchases, there is also a fear of a customer being mis-sold a product he/she does not require.
A better way would be to offer targeted communication to the buyers/customers of retail clients. For example, an individual interested in buying adventure sports gear would be trekking often. A regular accident insurance could be provided at a cheaper cost at the time of sale suited to his/her requirements. This would be more relevant.Insurance penetration is a matter of concern in the country. While the industry is trying hard to lure customers, expecting large sales volumes through sachet insurance could be misguided. These are early steps but will take years to attract the right target audience.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.