Life Insurance Marketing in India (C) The Changing Product & Pricing Norms

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BACKGROUND NOTE Contd..

However, according to some analysts, one of the major problems faced by the Indian insurance industry was the high premium rate charged by LIC over the decades. They argued that, when life expectancy had increased substantially, LIC did not revise its mortality table and reduce the premium accordingly.

Analysts also said that, due to poor customer service, more than 10% of LIC policies reportedly lapsed or were surrendered every year. LIC never paid attention to market research in order to understand customer preferences, while developing new products. It was pointed out that with no proper social security schemes implemented by the government of India, there was huge untapped potential in the pensions and annuities in India. LIC offered only one pension policy, Jeevan Suraksha (Life Protection), the returns from which contributed significantly to its revenues. However, with the liberalization of the industry, not only were premiums expected to go down, but increased products, improvements in customer service and deeper insurance penetration were also expected.

In so far as the premium is concerned, the pure risk protection products introduced by some new private insurers had no facility for savings, and hence, their premiums were very low, as compared to money back and endowment policies. In cases where LIC offered policies at relatively low premiums, private insurers were expected to score over LIC because of the additional benefits offered by their policies for a marginally higher premium. Analysts pointed out the affluent and busy customers would prefer policies offered by private insurers to avoid LIC's ‘tardy and cumbersome'procedures.

Though private insurers were trying to strengthen their presence in the market and increase brand awareness with large-scale multi media promotional campaigns, the real test awaited them in the area of distribution. The companies had realized this and, as a result, conducted extensive market research to figure out what type of products would appeal to customers.

Max New York reportedly spent eight months conducting exhaustive market research, and according to company sources, its policies were developed on the basis of the results of this research. One of the innovations of Max New York was that it added life insurance to credit risk insurance, whereby individuals could get their housing/vehicle loans insured. Thus, if a person failed to repay the loan amount because of a certain disability or death, the asset would not be impounded, because the bank or the institution would pick up the life insurance amount instead.

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