New ways to distribute insurance policies
(Any opinions expressed here are those of the author and not of Reuters)
On a rainy day in Mumbai, I was chatting with the taxi driver. It was a prolonged journey, made worse by a never-ending traffic jam. We talked about insurance and I asked him about his insurance cover. I heard the familiar story of a man being cheated into buying an expensive plan; he escaped only after losing a lot of money.
When we think of insurance, itâ€™s typically life, motor and health insurance that come to mind. These are relatively expensive and an already reluctant Indian consumer stays away unless forced into it. This â€˜pushâ€™ component has become the default sales mode. Motor insurance is mandatory by law and should have ready acceptance. But a large number of vehicles on Indian roads are still not insured.
Take the case of a personal accident plan for 500,000 rupees. This can be had for an annual payment of 1000 rupees; less than three rupees per day. Similarly, one could buy a critical illness cover of 300,000 rupees for about 1,200 rupees per year.
Given the option, a lot of people would want to benefit from it. Weâ€™ve all heard enough stories of accidents ruining the lives of not just the victims but anybody dependent on them.
In the cities, there is a huge population that needs such insurance covers. Somehow people are either not aware or else no one is willing to sell it to them.
There is an urgent need to rethink the traditional distribution models which may not be lucrative enough. This might be an outrageous thought, but why not let people buy insurance just by sending an SMS. Or for that matter, enable buying insurance through some equally convenient mechanism that does not involve a middleman uninterested in selling the product.
The way ahead would be to try new distribution channels. Why not make it available at ATMs? How about a group plan for taxi and auto drivers, one they can sell to passengers. Surely, earning 50 rupees is more than what they would make from a single taxi fare. Why not offer it at grocery shops? Every prepaid mobile phone subscriber walks in for a top-up – why not make use of that? What about children from the neighbourhood coming to us for a donation to a worthy cause – why not use this route? And how about getting the barber to make the pitch, surely you wonâ€™t leave when he is halfway through the haircut.
Some or most of my suggestions may border on the ridiculous, but these are exactly what we need to do. An unexpected expense often drives a lot of families straight into the debt trap. And we need to try and stop that from happening.
(For more articles by Deepak Yohannan, please visit MyInsuranceClub.com)