Expert Zone
Straight from the Specialists
Insurance industry players go online — reluctantly
(The views expressed in this column are the author’s own and do not represent those of Reuters)
From the year 2000 onwards, the Indian insurance industry saw a number of private players entering through the gates thrown open by the government. Public sector player LIC had already gained an edge by being a pioneer in the life insurance space. With an army of agents, LIC was way ahead of these latecomers and found itself settled comfortably.
It was evident that LIC relied heavily on its strong agent base. The latecomers, in their struggle to make a mark in the newly opened insurance market, followed suit. It was a herculean task for these private players to ape the insurance giant and more than a decade later, they still find themselves striving to gain substantial market share.
Getting exceptionally good agents on board, training them, retaining existing agents has been a constant struggle faced by the industry as a whole. The industry also explored other distribution channels like brokers, corporate agents and bancassurance but is still constantly being haunted by profitability issues.
PRODUCT SIMPLIFICATION AND DESIGN For starters, companies must focus on designing simple and easy-to-understand products. Some policies that exist in the markets today are so complex that even a fairly financially literate person would not be able to fully understand it. For some strange reason, instead of working on designing simpler products, the industry has and continues to depend on intermediaries to sell their complicated products. This activity is self-defeating and extremely expensive. The innovations, if any at all, are trips to Paris instead of Colombo or Goa, for the top-performing intermediary. Wait for a couple of years and we could see incentives like a trip on Richard Branson’s space flight.
A century ago someone said that Insurance is “Sold” and not “Bought”. It is a “Push Product” and not a “Pull Product”. Design a complicated and opaque product and make it available only through limited expensive channels and yes, it will always be a “Push Product”.
So what products do we need — Very Simple, Easy to Understand, Easy to Explain & Easy to Buy.
Five steps to a goal-based investment plan
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Life is filled with desires and ambitions. A holiday abroad, a swanky new car or a plush home, whatever it may be, we earn money to fulfil such goals. However, very often, when it comes to saving for our goals, most of us randomly make investments without a proper plan. We buy financial products, without giving much thought if it is actually going to help us at the time when goals are to be met.
This is where a goal-based investment plan comes into play.
The concept of goal-based investment stresses on having a planned and disciplined approach to saving money for the important goals of life. By having an investment plan defined around your goals, you could allocate your finances to the right asset class, so that they are readily available to meet the big expenses of life. Sounds complicated? Not in reality though.
From identifying your needs to choosing the right asset class, here are 5 simple steps to help you.
Step 1: Defining your goals
Before you embark on your journey of investing, define the goals that are specific to you and set a timeline as to when you want them fulfilled.
The ‘nothing can happen to me’ attitude
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Decent paying job? – Yes Chances of a better paying job? – Maybe, Yes Own a car? – Yes Own a house? – Yes Happy family? – Definitely Yes. I just love my wife and kids. I want my parents too to lead a great retired life.
That pretty much sums up most of us. India is growing and it has opened up a lot of opportunities in the last decade or so which has greatly improved living standards for most of us — the middle class. Just 15 years ago, a new joinee getting a salary of 10,000 rupees per month was probably the best in class in India. Then the software and services sector opened up and things changed so much for the better, at least monetarily.
Now, for the second set of tick-mark questions: Chances of being fired? (or company re-aligning verticals) – Yes (has already happened once) Car Loan? – Yes or just finished it off Home Loan? – Yes, EMI keeps increasing
Enough savings to last six months without salary (with car and home loan EMIs)? Very tough but can manage.
Enough savings for wife and kids if you die tomorrow? No. But why do you ask such insensitive questions? What’s wrong with you? I don’t drink and smoke, maybe I should exercise a bit — but nothing can happen to me.
Unfortunately, that too pretty much sums up most of us. And this uniformly applies to an individual earning 10,000 rupees per month and 1,00,000 rupees per month. Maybe this is probably too simplistic a way to check our financially vulnerable points — but then that’s what is most important and often ignored.
With all due respect sir , You sat it will always be a push product – can it not be changed ?.
Now, as you say again people are buying products online with no agent forcing them or coaxing them. is this not a sign that insurance can be bought too.