ACKO Life to sell only 'pure protection' life insurance plans, not to sell investment-linked products

ACKO to sell only pureplay life insurance

• ACKO Life to offer only pure term life insurance, no investment-linked plans
• Move aims to provide affordable, transparent life insurance and increase coverage.
• Company addresses mis-selling concerns and growing mortality protection gap

Did our AI summary help?

Digital insurer ACKO Life has announced that it will exclusively sell life insurance that is not linked to investments or income plans, the company founder Varun Dua said in a social media post.

The life insurance industry usually relies on life insurance products that guarantee fixed income and returns.

“Investment-linked insurance products lure you with the promise of 'getting something back'. Inflated premium, inadequate cover and investment 'returns' that an FD would outperform. At ACKO Life, we made the hard choice of not mixing life insurance,” Acko founder Varun Dua said in a LinkedIn post.

Such quasi-investment products dilute the original life insurance purpose, while as an investment product, it does not deliver good returns as well, the company said.

Dua added that such practices dilute protection with 50 other 'benefits' and add confusion for end-consumers.

“The move positions Acko as an ‘Unmixed’ insurer, prioritising high-value, low-cost life cover as a direct counter to the systemic issues plaguing the Indian insurance sector,” the company said.

Acko’s announcement comes amidst the new insurance bill, which has flagged mis-selling as one of the key issues plaguing the industry. According to recent IRDAI data a 14.3% year-on-year surge in grievances related to Unfair Business Practices (UFBP), or mis-selling.

While total life insurance premiums have grown to nearly $100 billion, national insurance penetration has declined to around 2.7 percent of the country’s GDP.

However, the high premium masks the widening Mortality Protection Gap—the financial shortfall families face upon the death of a primary earner. This gap has surged 35% since 2017, according to data from a report by the Swiss Re Institute. India’s underpenetration meant that the gap is much wider in the country in practice.

Acko said that by focussing on pure term life insurance, the company is looking to make insurance affordable and transparent. It said that this could help the Bengaluru-based company to drive up the penetration, apart from increasing consumer trust in the sector.