Why Are They So Popular? Products From Insurance Companies Here Is The Truth

Summary

In this episode of 'Your Life Your Mind,' Dr. Chandra Khut explores the rising popularity of insurance products despite criticism from fintech companies and financial influencers. Despite bad-mouthing, insurance companies are thriving due to their focus on addressing real customer needs, such as retirement planning and life goals, through innovative and tax-efficient products. The video discusses the role of insurance sales forces, the industry's adaptability, and the regulator's proactive measures to ensure customer protection and industry growth.

Takeaways

• 📈 The insurance industry has seen a significant rise in business, with a growth of over 25% in the first quarter of 2024-2025.
• 🔍 Despite criticism from fintech companies and financial influencers, insurance products are gaining more acceptability due to their ability to meet specific customer needs.
• 🎯 Insurance companies focus on addressing real-life needs such as retirement planning, wealth creation, and education funding, setting them apart from other financial sectors that may create greed.
• 🏦 Insurance products bridge the gap between the safety of bank fixed deposits and the higher returns but volatility of mutual funds.
• 💼 The insurance industry has built a vast sales force, with over 10 lakh agents across India, ensuring a personal touch and understanding of customer needs.
• 🌟 Innovative insurance products like ULIPs with zero allocation charges and guaranteed return insurance plans are becoming more attractive, offering tax benefits and addressing reinvestment risks.
• 💡 Insurance companies are responsive to market feedback and regulatory changes, leading to innovations that improve product quality and customer satisfaction.
• 📊 The persistency of policies, a measure of customer satisfaction and product quality, is improving, indicating that policyholders find value in their insurance products.
• 💰 Insurance products offer solutions to tax-related concerns and provide a disciplined approach to savings, which appeals to customers looking for financial planning and security.
• ⚖️ The insurance regulator plays an active role in ensuring transparency and fairness, leading to regulations that protect consumers and promote product innovation.

Q & A

Why is the insurance industry's business growing despite criticism?

The insurance industry is growing because it caters to the real needs of customers, such as retirement planning, wealth creation, and life goals. Additionally, the persistency of policies is improving, indicating customer satisfaction with the products.

What is the significance of persistency in insurance policies?

Persistency refers to the continuation of policy payments by the policyholder in future years. High persistency rates indicate that policyholders find value in their insurance products and are satisfied with their choices.

How has the insurance industry's growth been in the first quarter of 2024-2025?

The insurance industry saw a significant growth of more than 25% in the first quarter of 2024-2025, which is considered remarkable in the financial sector.

What role do insurance advertisements play in the popularity of insurance products?

Insurance advertisements effectively communicate the benefits and appeal of their products to the general public. They address specific needs and life goals, making the products more attractive to potential customers.

How does the insurance industry differ from fintech companies and financial influencers in terms of customer engagement?

The insurance industry focuses on solving problems and attending to the needs of people, while fintech companies and financial influencers often create a sense of greed by promoting high returns and cost savings.

What is the importance of the sales force in the insurance industry?

The sales force is crucial as they are closer to the customers, understand their needs, and provide personalized advice. They help in policy persistency and customer satisfaction by addressing human shortcomings and providing ongoing support.

Why do people trust insurance companies and their sales forces?

People trust insurance companies and their sales forces because they cater to real life needs, provide disciplined financial planning, and offer professional assistance in managing investments and risks.

How does the insurance industry address the gap between bank fixed deposits and mutual funds?

The insurance industry offers products that provide safety of capital like bank fixed deposits but with potentially higher returns than bank FD rates. They also provide tax benefits and other additional benefits that mutual funds do not offer.

What are the innovations in the insurance industry that have made ULIPs more attractive?

Innovations in the insurance industry include ULIPs with zero allocation charges, tax advantages, and competitive pricing compared to mutual funds. They also offer graded payout products and guaranteed return insurance plans that cater to retirement needs and provide tax-efficient returns.

What regulatory changes have been implemented to improve the insurance industry?

Regulatory changes include capping the expense ratio of unit-linked insurance plans to a maximum of 2.25% over a 10-year period and the introduction of regulations to ensure customers receive the maximum surrender value in case of mis-selling.

How should one approach evaluating an insurance product?

One should evaluate an insurance product by considering whether it caters to any of their life needs, provides value, and addresses specific financial goals. It's important to listen to the sales pitch, ask questions, and make an informed decision rather than being influenced solely by criticism from other financial sectors.