Widening the base

Logic dictates that every home owner should have an insurance policy to not only cover his house but also its contents against every possible risk. however, a closer look presents a dismal picture. home insurance is one of the least sold financial products, especially when compared with auto insurance.

One of the reasons home insurance has a low penetration is that people often perceive their houses to be at a lower risk compared with a car. This is surprising because a house is susceptible to many accidents, such as fire, floods, burglary, etc. Often, home owners don't even bother to instal a standard system for security and safety, which heightens their vulnerability to loss or damage.

This segment presents a sizeable business opportunity for insurers due to its high numbers. So far, the industry has been largely unsuccessful in marketing home insurance policies as most potential customers, especially in smaller towns, are either not accessible or do not receive guidance on how to manage their risks.

What is needed is cost-effective distribution, customer education and products and services that can be specifically designed to meet individual needs. Innovations, such as providing a home insurance policy as an add-on to a health plan, could see a significant growth in this segment.

Ajay Bimbhet is Managing Director, Royal Sundaram Alliance Insurance