Sample insurance products are need of the hour

Insurance penetration has been a cause of concern in India. With life insurance penetration (premium as a percentage of GDP) below 4 percent and general insurance penetration below 1 percent, there is dire need to make policies more appealing to customers.

One good step taken is the sandbox approach. The Insurance Regulatory and Development Authority of India (IRDAI) on January 14, released a list of products approved under this method.

These products will be valid for a six-month period and include user-friendly insurance such as fitness tracker plans in health insurance and pay-as-you-drive in motor insurance.

The method will help collect first-hand feedback from customers before a policy is commercially launched. Similar such short-term products need to be made available on a trial basis for customers as a free sample.

Take travel insurance for instance. While there has been a rise in air travel across the country, the commensurate risk covers have not risen. One way to popularise the product could be to offer it as a sample for a few airline customers.

Damage to the luggage is something that is common during airline travel. If the insurance product for air travel includes coverage for physical damage to the luggage and is offered as a free sample for a few passengers, it could be a good way to increase awareness.

If the product is offered as a free sample, customers could be more forthcoming in trying it. Once the benefits of the insurance are experienced first-hand, it would be easier to sell a regular product to these individuals.

While some may argue that insurance is not like an FMCG product, it is always best to let customers ‘sample’ a product that they will purchase. Unlike consumer goods that are used within a few days of purchase, insurance is a long-term product making it crucial that the customers are able to ‘sample’ the policy.

As a starter, product categories such as health insurance, travel insurance, motor insurance and term insurance could be offered as a sample product with small-sized covers.

Using analytics, customer behaviour could be tracked to offer a relevant product. For instance, a user booking a trek online could be offered an accident cover through a random selection online for free. Word-of-mouth publicity by the sampler could be used to help raise awareness about the importance of insurance.

Similarly, a basic health plan could be offered to a new-born child based on the parent’s e-commerce purchases. Tie-ups with relevant partners could help collect sufficient information for the same. Ailments are common during a child’s first year and offering a sample product could help the new parents consider buying a comprehensive plan.

This could be beneficial especially in rural areas and low-income households. For example, an individual buying brick/cement for building their own house could be offered a sample home and dwelling insurance for the first year.

It has been over 20 years since India's insurance sector was privatised. Despite this, the fact that insurance is a pull product makes it clear that insurers need to approach policy sales through a different route.

Offering select free samples to a few would be a good starter to get the rest into the insurance fold.