Customer is King

Chandralekha Mukerji        Print Edition: January 2012

Last year was eventful for both insurers and the insured. There was a spate of regulatory changes. New regulations for unit-linked insurance plans, or Ulips, came into effect from 1 September, capping various charges and transforming the category. With this, Ulips became more attractive long-term products. The guidelines also reduced the chances of mis-selling, which was rampant earlier. Health insurance portability is now a reality. So, if you are unhappy with your insurer, you have the option to switch to another without worrying about continuity benefits that have accrued on the existing policy. Then there were new guidelines on pension products .

Most of these measures are clearly in the interest of customers. "There is more transparency in the industry now as compared to a year ago. Product costs have come down and life and health insurance have become more viable options. The service quality has improved. The cumbersome process of buying a policy has been simplified and now requires less paperwork," says Anil Rego, CEO, Right Horizons.

The coming year promises to be no less exciting. There are issues such as open architecture model for distribution of insurance products and multiple tie-ups with banks as well as regulations on insurance aggregating sites pending with the regulator.

There are also efforts to make insurance buying paper-free by dematerialising policies. Finally, and hopefully, a return to more normal market conditions will lead to an improvement in fund values for buyers. These issues will have a direct impact on customers.

Here we try to draw a picture of how 2012 will pan out for insurers and their customers.

More choice, better service
The industry is on a high growth path and many new players are expected to enter the market. With a rapidly-evolving landscape and competition, the customer will be empowered with more choices and customised products that fulfill specific needs. "Insurers will launch better products and design plans that meet customers' life-stage needs such as children's education and retirement. We will also see greater focus on customer service as reducing lapses will become more important," says Ajay Srinivasan, chief executive, financial services, Aditya Birla Group. There will be better operational efficiency in each stage of the insurance cycle which will definitely make you a happier customer.

To fight competition, insurers will launch new products. "The one-size-fits-all approach will no longer be dominant. For instance, most existing health policies don't cover dental and vision services, home health services or long-term care. You'll see many players focus on these untouched areas," says Shefali Chhachhi, director, marketing, Max Bupa Health Insurance.

Wider and Easier Access
Bancassurance is already in place. If draft guidelines on open architecture model of distribution are cleared, both insurers and customers will gain.

Ajay Srinivasan chief executive, financial services, Aditya Birla Group
Insurers will make effort to drive this as a viable and cost-effective distribution model to reach more buyers. Allowing insurers multiple tie-ups with banks will give you more options under one roof.

There may be a push towards the online platform. Online term products are already a hit. Insurers are planning to sell other products such as traditional endowment and Ulips on this platform.

Safer, Simpler and Transparent
In a circular to web insurance aggregators such as Policybazaar.com and Myinsuranceclub.com, Irda has asked them to prominently disclose the fact that visitors' information will be passed on to multiple insurers. Moreover, to ensure that you get unbiased information, the aggregators will not be allowed to rate products or carry advertisements and sponsored content on their websites. The guidelines put the responsibility of securing the entire process of online buying on the aggregators.

Also, in pension product guidelines, while the regulator has dropped the minimum guarantee of 4.5% per annum return to any guaranteed return above 0%, it has asked insurers to clearly disclose the nature of these guarantees to customers. This will enhance transparency. The listing of insurers will further aid this initiative. "While the immediate result of IPOs could be value creation for shareholders and access to insurance companies stocks for investors, customers will benefit from greater transparency," says Srinivasan. The regulator is likely to look at bringing in simplicity as well. "Highest-NAV products will be a casualty then as most buyers don't understand its dynamics," says Rego.

Over time, the industry will undergo consolidation and only the best will survive. "Healthy competition, stricter norms and watchdogs will keep insurers agile," says Rego. The attempt is to make the industry more organised, less fragmented, with greater transparency and operational efficiency. These will ensure efficiency and convenience for the customer.

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