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“When I look at life insurance, this segment of the industry is out of steam. And the government is making a big mistake by protecting this particular segment. As a proportion of the overall insurance industry, India is very lopsided in favour of life insurance. But most of the products sold are not pure life insurance,” Dahiya told BI India while comfortably seated in his office in Gurgaon.
Besides protecting the segment, he noted that consumers are kept in dark about life insurance products. “But the problem is that at present people are sold insurance products without being told what the product really is,” asserted Dahiya.
Explaining his statement, Dahiya noted that the life insurance products that are sold to the customers are pitched as investment products. He pointed out that at present; people are buying insurance products for investment purposes. “It is true that investment part of the insurance attracts people to buy insurance products. We have done an analyses of almost 1000 customers and almost all of them said that their primary objective is to make investment and not insurance,” he said.
But it isn’t that pure life insurance products are not available in the market. According to Dahiya, this category of insurance product is sold on digital platforms only. “Pure life insurance has seen some action in the last five years. And it would not have grown, had there not been any digital platform available to the consumers, which is where consumers are buying pure life insurance products. For instance, a consumer can buy Rs 1 crore cover for Rs 10,000,” he noted.
Substantiating his point, Dahiya elaborated that the cost of physical distribution of pure life insurance has made it financially unviable. “For a physical distributor to make such a policy viable, he will have to sell one policy a day, which is quite a challenge. Hence, the physical distribution of the product cannot sustain that product. But that is where the market will eventually lie,” he averred.
Dahiya told BI India that the segment is evolving—from being price competitive to feature rich. So what does he mean when he says feature rich? “When I say feature rich, it means pay-outs over time among others. So, we are moving into more and more pure risk zone. But it is just the mechanism of payouts is changing because people prefer pay-outs in regular intervals than a one-time lumpsum amount,” he said.
Citing an example, he added, “For instance, when I take a policy and if something happens to me, then I would want my wife to get a regular pension for the entire life from the policy that I have taken. I would want my children’s educational expenses covered. I would like to create almost corpuses on incidents that are objective oriented. I see the market moving in this direction and that is where the growth will really come from.”
However, it should be noted that at present, the pay-outs happen when there is a death, disability or illness. In a no-death scenario, the pay-outs don’t happen.
Currently, for Policy Bazaar, nearly 90% of their sales in the life insurance segment comes from pure life insurance. The company is now foraying into investment products such as Fixed Deposits and Mutual Funds through its new venture Paisa Bazaar.