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How standardisation of insurance products help customers

Standardisation not only improves consumer choice but also increases competitive pressure on insurers to offer the best services at relatively lower prices than other insurers.

January 4, 2021 6:27:43 pm
One of the most promising solutions that the regulator has recently come out with is the Standardisation of Insurance products. (File photo)

Written by Tarun Mathur

Sustainable growth in the insurance industry primarily relies on consumers making informed choices by picking the right insurance products. Yet in many scenarios, consumers do face trouble in understanding the product rightly.

Policy seekers do face issues in several scenarios be it while comparing products or while making a choice from the plethora of options available in the market. Often these difficulties end up with customers having to delay their buying decisions. During such situations, providing clear, transparent information to the consumers is of utmost priority.

Simplifying the available options can turn out to be an excellent attempt to enhance the trust between consumers and the insurance eco-system.

Standard insurance products introduced in market

In the last one year, the various steps taken by the insurance regulator – IRDAI – for the benefit of customers have been really commendable. One of the most promising solutions that the regulator has recently come out with is the Standardisation of Insurance products. With this move of standardising complex insurance policies, IRDAI has enhanced consumer buying in today’s time.

Within the last 6 months, the regulator has introduced several new standard insurance products namely – Arogya Sanjeevani, Corona Rakshak, Corona Kavach, Saral Jeevan Bima and Standard Personal Accident Cover (Unnamed as of now). The insurance regulatory body maintains that introduction of standard insurance plans will make it easier for consumers to select services owing to the standardization of the process and easy availability of offered services.

Within a few months of the rollout of the Arogya Sanjeevani standard health insurance plan, the product has played a pivotal role in increasing transparency and enhancing the health insurance penetration rate in India.

Standardisation not only improves consumer choice but also increases competitive pressure on insurers to offer the best services at relatively lower prices than other insurers. So a positive side effect of the standardization has been the intensified price competition that has further benefitted the consumers.

Need for standardisation

Consumer choice of the right insurance products is amongst the key foundations of the entire insurance ecosystem. Apart from creating trust and confidence in the minds of the policyholders, standardisation also enables insurers to market their products in the best way possible.

Moreover, often disputes are raised during the claim settlement process and standardisation plays a key role in reducing such disputes. This is mostly because the terms and conditions of processing and settling a claim under a standardised product are quite simple and transparent.

Talking about times like the ongoing COVID-19 pandemic, when each one of us has realised the sheer importance of insurance in our lives, having standard products makes all the more sense.

Due to the multiplicity of insurance products in the market, consumers are often left confused on which one to buy, as at times understanding the policy terms and conditions might come easy. Here, it is the responsibility of the insurers and their distribution channels to correctly explain the offerings of several insurance products.

Once the customers are able to apprehend the product and its offerings, it builds a trust factor in them towards the insurer. For customers, the first go-to person must be the insurer in order to gain relevant and right information regarding any insurance product.

Promoting standard insurance products, a must

In order to narrow down the protection gap in India and increase the insurance penetration rate, it is important for insurers to actively participate in promoting and selling standard insurance products. Apart from enhancing the revenue, this will also improve the relations between consumers and insurers.

Standardised products usually cater to a category of customers, especially the first-timers. However, we must remember that most insurance products in India are push products and the success of the standardised plans significantly depends on how well aware consumers are about these plans. With intermediaries aggressively adopting standard products, the products are expected to get more visibility and access.

Take note

The standard insurance products remain to be the best buy for first-time insurance buyers who do not have any kind of financial protection and for those who do not believe in saving a part of their earnings for rainy days. People who have higher financial liabilities and can afford to pay a premium for regular health and life insurance policies may opt for comprehensive covers that provide greater financial coverage against unforeseen circumstances like hospitalisation or death of the policyholder.

 

The author is the CBO at Policybazaar.com. Views expressed are that of the author.

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