Life Insurance: Its high time industry launches a protection campaign
Hesitation to discuss death and the consequences
In India, life insurance policy is mainly sold as a savings instrument. This is probably because an insurance sales person finds it difficult to meet a prospective customer and discuss about his/her death. There is a fear that the discussion on death will not be taken positively. Hence the discussion is focused mainly on the maturity benefits of the policy and not on death benefits. Since these maturity returns are not at the same level as returns on other instruments like bank deposits (due to cost of death benefit etc), insurance policy looks unattractive. Sometimes this can lead to mis-selling, i.e. promising higher benefits than available. The reason for all this is the hesitation to discuss death.
But death has to be discussed
Times have changed now. The current society understands these things much more than the previous society. Even if they don’t (rather don’t want to), death is a reality and hence the consequences of pre-mature death will have to be discussed and adequate precautions will have to be taken. Who else can do this more effectively than life insurance industry. In my opinion, a massive campaign on protection (focusing on pure term and health insurance) needs to be launched at the industry level. This will create awareness. Some insurers have tried to do this earlier but not succeeded much as it was not an industry level effort. Those who bought pure protection also did not buy enough cover to meet all the financial requirements of the family after the death of the bread winner. This needs to be highlighted adequately in the campaign.
Its protection in other markets
In many advanced countries, more than 50% of the insurance premiums are from protection, whereas in India, it is much less, probably single digit. This is an indication how under insured our society is. There is no way insurance industry can compete with banks and other providers on savings instruments due to the cost of insurance. There is no way customers can be mis-lead on returns in this digital age. Hence the only way for the industry is to focus on its core business, i.e. insurance (and not on savings).