Page 35 - Insurance Times August 2018

Customer education
There is a need to invest in the area of customer's education; cost, which if managed well can be very useful for all the
this is true at least in mutual fund and insurance as banking
is known to everyone. It was made to know that the
penetration of mutual fund is lower compared to the
insurance industry. It was also informed that the mutual
fund is investing around 2 basis points of the total mutual
fund towards the customer's education. A similar approach
is required in the insurance industry as well. The penetration however present some challenges in adjusting the future
in the insurance industry is largely due to the regulatory
push either due to tax benefits in the insurance products or
mandatory purchase in the motor insurance.
Even for the health insurance is largely driven through
mediclaim sold by the general insurance companies and
purchased as a bulk product for employees by the employers.
The true insurance penetration would come only if customer
walk to the insurance company branch to purchase for the
protection or savings need, for this purpose customer's
education is must. The regulator may keep few percentages
of Assets Under Management for insurance companies
mandatorily putting in the customer education kitty.
Insurance Sector
Customers continues to pose challenges to insurance
companies in all the three areas of life, health and general
insurance with regard to meeting the top line and stickiness
with one insurance company. Customer's need continue to
be the prime criteria of products manufacturing focal point.
The key challenges in the distribution have been what
customers want, managing the distributors and their needs
and satisfying their demands, creating a balance between
various stakeholders such as shareholders, regulators,
customers and distributors, time lag between the concept
stages to launch stage such time lag may wipe of short to
medium term opportunities. The regulator has brought up
simple product concept through point of sale (POS) , where
the short term demand can be catered.
On the technology side, insurance companies are heavily
investing into the digital world and it was acknowledged the
help online system have provide in knowing the customers
through the use of Addhar.
On the health insurance side, some companies are focusing
on customer's wellness side rather than focusing on sickness
pitch. This means that insurance companies are focusing on
the customer's wellness through regular monitoring of
customer's fitness and adjusting the premium in the
subsequent year.
This helps in customers in the good health, help insurance
companies through increasing the customer retention and
also help in managing the claim ratio to the manageable
level. However, such connect with the customers has its own
stakeholders. This wellness approach helps reaching the
customers with existing disease as there morbidity will
improve with regular monitoring.
A similar approach can also be made in the life insurance
sector subject to regulatory approval. This approach may
premium due to improvement in health as premium remain
level through the policy term. This could be possible under
reviewable term products after a frequency of five years
where the experience of term portfolio may be passed to
customers by increasing the sum assured.
Mutual Fund
Though mutual fund is in existence since the days of Unit
Trust of India in 1963-64, however, relatively a new player
in the game compared to insurance and banking. The
penetration of mutual fund is lower than the insurance
partly due to lower exposure of people to these products
and partly due to little regulatory push compared to
insurance products where tax benefits are there. For
common man, mutual fund presents different opportunities
in maximizing the return based on their risk appetite. One
of the key features of mutual fund products is that it
presents inflation linked return.
On a one hand the availability of liquidity in the mutual fund
presents a good opportunity for the short to medium term
investors to liquidate their assets in case of need, while on
the other hand could pose challenges for long term investor
who may get lured with liquidity defeating long term needs.
However, this is design issue of the products, may add more
variety and vitality if the locking period in increased to 15
years matching with PPF by tenure and higher return due
to exposure in mix of equity and bonds.
The mind set of customers are now changing from assured
return mode to taking more risks, however this phenomenon
is observed in metro cites compared to other places. The
customers need to understand when taking risk that they
may not make money all the time, for this purpose, long
term investment is necessary.
The industry has seen tremendous growth over the years -
as of May 2018, AUM stands at Rs. 22.60 lakh crore; there
are 7.35 crore folios or accounts, and 39 fund houses or
AMCs. SIPs contribution more than doubled from Rs. 3,189
crore in May 2016 to Rs. 7304 crore in May 2018.
In the mutual fund advertising and marketing is governed
The Insurance Times, August 2018 35