Page 36 - Insurance Times August 2018

by SEBI MF Regulation 1996. There is a requirement of use
of no celebrity in the advertisement; the advertisement
cannot display of future prediction, this could be due to
uncertainty that market presents to the investors. There are
defined parameters for print media as well as for the audio-
visual where disclaimer on the screen for at least 5 seconds,
in a clearly legible font-size covering at least 80% of the total The customer segmentation is based on income level and
screen space and accompanied by a voice-over reiteration.
Banking
The banking industry faces comparatively lesser challenges
in reaching to the customers compared to insurance and
mutual fund, due to historic presence of banks for savings.
Some of the banks are making innovative ways to reaching
the rural areas, where the marketing is based on the tools
available within the rural areas such as sponsoring the local
sports where the rural population participates in a big way.
Such banks are also analyzing the customers' behaviour to
identify suitable product for them. It is observed that even
in the rural areas, smart phone has reached and they
leveraging this tool to reach to them.
A similar approach may be used by the mutual fund industry
and insurance industry; this will also reduce per unit
distribution cost. The needs of the customers in the rural
areas are very different compared to urban areas and banks
are using such differentiation. It is observed that in rural
areas, the ticket sizes are smaller, say the personal loan
could be in the range of 20K to 30K.
Housing Finance
Housing finance is a relatively new product compared to
banking and insurance. The post liberalization of the economy
has given boost to the income younger generation leading to
increase in purchase of housing at an early age compared to
earlier regime of 1990s and earlier. Since the year 2000 there
have been spurt of housing projects where many people
purchasing multiple houses for investment purpose.
The economic turmoil and demonetization have taken a hit
in the housing sector affecting adversely the housing finance.
The repayment of loan by the customers is dependent on
job security which in turn dependent on not only the local
economy but also global economy due to many back offices
jobs in India. The risk of property market crash will be there
till the time we are dependent of the development of the
global economy.
Similar of other financial products, housing loan also have
low penetration at 2.5%, which is much lower compared to
China at 5.4%. The maximum housing loan penetration is in
Sweden at close to 60%. This indicates that there is lots of
36 The Insurance Times, August 2018
scope for improvement in the future. The tenure of the loan
is lowest in Turkey at 7 years and 45 years in Sweden with
median term of 25 years. The Government's initiatives of
housing for all by the year 2022 will increase the housing
loan demand.
their attributes are different; more elite customer is digital
savvy, their credit history is relatively easily available and
income details are easy to access. The customers with lower
income segments, credit history details are not so easily
available, the income documentation availability is
challengeable and they are lesser digital savvy. In this sector,
the loan disbursement process cannot be all completed
online as the customer is to visit the bank branch.
The establishment of Real Estate Regulatory Authority (RERA)
by the government in 2016 has helped the buyer restoring
confidence in the sector. The projects by the builder and
agents are to get registered with the body. Until now the
terms and conditions were in favour of builder, this will create
more equity among the customers along with the confidence.
The 2018 budget have taken sheen out of buying the second
house, this may impact the housing loan industry. From
customer's point of view, the second house investment may
not be easy now. This would mean that customer will park
their money in other financial instruments such as mutual fund,
insurance or directly in the equity market.
Conclusion
Overall, the summit was a success with many different
topics coming for discussion ranging from banking products;
insurance, mutual fund and housing finance. Some of the
common theme coming out was focus on customer's need,
the market research was acknowledged as luxury, but
agreed that this is great tool highly underutilized.
There was almost an consensus that there should be another
summit on the customer education. The investment on
customer education will go in long way helping the financial
services industry in gaining the strong foot print for long term.
The customer education will also reduce the mis-selling.
Digitalization is a next wave and those who manage this
platform better will be the future market leader. Those
embarrassing the digitalization late may go in a Nokia way.
The rural sector presents large potential, they need to be
leveraged as a separate customer segment and deal with
them separately, there needs are very different compared
to the non-rural areas.
Disclaimer: The views expressed are mine and not necessarily
of my employer.