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Insurance not seen as an investment: Study

Purvita Chatterjee

MUMBAI, Dec. 8

AS India's insurance industry stands on the threshold of privatisation, it the mindset towards investing into this sector which has to change. Recently the Mumbai-based market research agency, Blackstone Market Facts, unveiled a study to understand the b arriers to insurance in the country.

The study was an attempt to find out how an insurance company should position itself to overcome barriers to insurance. Its research was based on focus group discussions amongst males who have invested up to a minimum of Rs 25,000 in the past one year re siding in Mumbai, Delhi and Thrissur in Kerala.

From the study, there emerged two segments: The Return seekers - in the 25-30 age group, without children having their own business and the risk hedgers - in the 30-40 age group, with children and also those over 40 years old who were salaried and close to retirement. It was discovered that the importance of money - though high across groups, is a function of different factors, depending on age group/stage in life.

While the `return seekers' were more individualistic, the `risk hedgers' were more family/future oriented in terms of the reasons for investment. Thus the expectations from an investment option would be distinct and different strategies would be required to woo each segment. The distinction is strategies would be the lure of high returns versus the blanket of security for the two different segments.

The advantages perceived in investing into insurance comprised tax saving benefits, risk coverage and security of the family. Besides, small investors had the advantage of investing in small amounts and then getting a lumpsum on maturity. The disadvantag es lay in the area of operations. Investing into insurance meant lengthy procedures, agent problems and lack of customer orientation.

To elucidate further, across all age groups insurance was not seen as an investment option. The barriers to treating insurance as an investment was linked to factors such as lack of liquidity (a problem for the older age group), servicing and lengthy pro cedures (a concern across all age groups) and low awareness levels (attributed to lack on initiative on the part of the agent).

Besides, the salaried individual looks for tax savings and does not look at insurance as an investment option. On the other hand, the businessman finds the returns too low to consider it a worthwhile investment.

Thus the key reasons for investment into this sector is based mainly on risk coverage and tax benefits. Insurance is not perceived to be an investment.

Presently insurance policies were perceived as low _ risk and low-returns instruments, necessary for covering risks. Satisfaction levels were low along with lack of differentiation in products amongst insurance providers.

For the new players to fill this lacunae, there has to be more customer-orientation in terms of faster settlements, lesser documentation and polite and informed personnel. The agents' role has to modified with more guidance and communication on their par t.

More importantly, the insurance products have to establish credit worthiness with the Government backing or an association with an established/reputed Indian company. Long investment tenures in fact makes these conditions a necessity.

Other factors which could be improved upon include the need for transparency in operations, wide distribution network (like collection centres in remote areas, house cells and Information hot lines) and variety/flexibility of schemes. There should be cus tomisation of schemes to suit every investor ensuring higher returns.