847 Life Insurance Products - REALLY?

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As of April 2019, there were 847 life insurance products available in the Indian market. Total of 640 individual products and 207 group insurance products. Only one word comes out after reading this – OMG!!

Insurance is a subject matter of solicitation‘, which essentially means that insurance has to be requested or asked for, not sold. This phrase, which is found in all insurance advertisements in India, was mandated by IRDA. This means it is the customer who is keen to buy the insurance and not the agent or the company forcing you to buy.

This makes it controversial!! Rather, a heavy word – controversy. We all are bomb-barded with tv, radio and print media advertisements day in and day out. A survey conducted by MBA Students with almost 800+ interviews suggests that an individual listens to or sees a life insurance advert at least 6 times on an average per day!! On a lighter note, if scenes from history textbooks are shown this many times a day, then a student would have scored much more and would have loved it too!!

Questions are – do we really need these many products? Why do these companies or agents are forcing a person to buy?

Well, the answer is simple – life insurance covers one’s life, which makes it compulsory to buy. But the confusion starts when we research which one to buy. Following is the chart of a total number of companies with their number of products:

Having so many products would also cost something. This is clearly passed on to the customer who buys it. Maintaining an insurance product also requires significant investments from a technology perspective. Gradually scrapping the products that do not sell could be a good start. This way the cost will be reduced and hence, the profit can be increased.

IRDAI has discouraged companies from filing too many products; also, the existing products themselves offer a range of options to the customer. The significant question that these companies could introspect on could be about what differentiation they could offer in products that would attract customers to buy.

Growing Indian population and only 3.69% insurance penetration, few insurance products with easy-to-understand features is what is actually required today. These needs could well be addressed by a few meaningful products from each of the insurers, rather than the hundreds that are lying unsold.

Moreover, penetration has decreased from 4.6% in 2009 to currently 3.69%. There are other investment options widely available – Mutual Funds, Debt Market, Stocks, Commodities, etc. As it is rightly told – Do not mix insurance with investment!! Follow this and be wise!!

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