Sunday, October 31, 2010

Innovation & Fooling at the same time...

“Jeevan Suraksha Ka Naya Nazariya” or "Redefining Life Insurance" is what Bharti Axa is trying to position itself as, through the very recent campaign on claim settlement. Is claim settlement that easy a thing so that every claim can be settled within 48hours?? Or Is Bharti Axa investing in the almighty bonds/stocks of the companies floated by the gods that gives them a returnof more than 365% per Annum to guarantee 1% per day as interest??

I think the answer for both would be an absolute 'NO'. If not, then are they trying to fool around with customers or Are they innovating across the claim settlement process in the sector?? Do we call it Finnovating or Foolovating??

There are two sides for an Ad always. 1.What the Ad exactly says? and 2.What does the customer perceive out of the Ad? There is always a difference in both these many a times. But, it is not always as different as it is in this case. Difference between fund value of a ULIP and the claim settlement process.

Fund Value in a ULIP is the current market value of the money invested in Equity/Debt/Mixed funds after deduction of all the charges from the money that a customer pays as premium. Sum Assured is the Life Cover that the customer has in a certain plan which was typically around 5-20 times the Annual premium prior to Sep 2010(post Sep 2010, it has become around 10-20 times due to change in rules). And most of the ULIPs have a death benefit equal to the highest of Fund Value or Sum Assured and comparatively very less number of ULIPs have a death benefit equal to Sum of both Fund Value and Sum Assured(Illustration in the 3rd image below).

On death of a customer, once all the documents are submitted by the nominee (claim is raised) the company decides upon payment of the claim and then pays the death benefit. The Claim might take more time if the company feels that there is some form of fraud either surrounding the death or while taking the policy. If the company finds that the customer/advisor has done a fraud while taking a policy (not disclosing any pre-existing illness, other health problems etc. while taking the policy which might have caused the death) the company can with hold payment of Sum Assured but will pay back the Fund Value as it is something the customer has invested and there is no cost involved to the company in it.

Now, most of the times fund value is less than the actual Sum Assured on Death unless, customer has used features such as top up(a process of adding extra money to only invest without increasing Sum Assured prior to Sep2010. Post Sep2010, the rules have been changed by IRDA to mandatorily increase Sum Assured on every top up), fund value grown at huge pace (i.e., 3Lakhs invested over 3years growing into 7Lakhs which is above a nominal 5Lakhs of Sum Assured/Life Cover).

Now, coming back to the Ad: 1.What does the Ad say exactly? - It shows a very much disturbed lady trying to get a claim settled upon death of her husband which is not taken in right sense / snubbed by the company executives. Meanwhile, Bharti Axa adds an emotional touch on claim settlement and the background voice says "the company would settle the fundvalue within 48hours of claim documents being received" with the executive telling the lady that the cheque would reach her in 48 hours. And the screen shows that it would pay 1% interest per day on fundvalue for every day above 48hours. This doesn't speak of Death Benefit being settled in 48hours or any timeline for the same and it doesn't speak about the term plans(plans with high cover with a very minimum premium), endowment plans(plans where death benefit is always very high compared to what customer has paid till date).

2. What does the customers perceive out of the Ad? - Looking at the financial literacy in India and that too in a sector predominantly dominated by LIC agents for 50years without educating the customer, the perception for even an above average customer is very different from what the Ad actually says. This is because of the backdrop on which the Ad starts(Problems with claim settlement), Bharti Axa executive shown as coming to help to understand and saying the cheque would reach within in 48hours, no clear disclaimers or lound signals in the Ad saying this is only to guarantee a fundvalue in 48hours and not the whole of death benefit, term and endowment plans etc. The perception for most of the customers seems to be that the Death Benefit would be paid or the claim will be settled in 48hours or else with 1% interest per day for the delayed period. Ofcourse, there are all those disclaimers that this is only for a ULIP and only the Fund Value etc, on the website but, how many customers would log into the website to check the details on disclaimers??

So, Are they trying to fool around with customers or Are they innovating across the claim settlement process in the sector?? I say innovating because, the company needs to pay the fundvalue to the family irrespective of fraud or genuinity of the policy holder's statements while taking the policy. Then, why should the companies take so many days to process the fund value as well?? They can definitely redeem the units and settle the fund value within 2days and then continue their investigations or further processes to settle the rest of the claim amount which is definitely not the case with the Life Insurance industry in India today.

They receive a claim from the family. Once, all the documents seems to be in place the process of looking into the claim starts and it might take anywhere between 7 to infinite days to complete the investigation process in case of any problem. So, it would be better to lend a helping hand to the family with the fundvalue with in 2days which might help many families on immediate costs incurred. Then, why not settle the fundvalue in 48hours??

Can, other Life Insurers in India learn from them or atleast do something that they are always good at(copying the products from other companies products most of the time) by copying the process of Bharti Axa... Or Can IRDA mandate companies on such issues??

But, still the small corner of ethics asks, Should we call it Innovating or Finnovating??

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Sunday, October 17, 2010

Some things never change...


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Over the past weeks, there have been new branding campaigns for LIC and Indian Railways.. So, what's the similarity in both apart from the image or reality that they are government organizations??

I have seen the website of LIC over the past 2years. Till a couple of months back, it had remained the same slow, erroneous, semi-updated kind. The premium calculator that gives quotes whenever it feels like, the speed is definitely so slow that can make you sleep by the time a brochure opens up. But, I have seen it yesterday post the new campaign from LIC about the online services, payments etc and the change is amazing. It's a perfect 10 on 10. LIC has definitely got it right on making sure that, it is in line with what it has been advertising.

But, there was another campaign too. That's about it's wonderful polices and why go anywhere else?? when you have LIC... Yes, it has some of the best policies in the Life Insurance space.. Yes, it might have had or not in reality but, yes, definitely deep inside the layers of some customers brain/

memory/mind.. whatever you call it. The campaign makes sense and this would have worked better off a couple of years back but, might not be in today's changing India.Financial Literacy ratio in India had been on an upward slope since the past 2years and many of those who never understood A,B,C of Insurance and Investments today would explain different concepts of planning better than those number of trained Agents. Ofcourse, the ratio we are speaking of is still low. But, we need to understand that it is on an upward slope and especially with the fighting regulators the pace will grow further. Hence, it is very important for you to understand what have you been suggesting the customer today. Else, once he/she is educated in the next 4-5 years he will look back and say

what crap am I holding since past years?? This is what many say today which they held due to pressure from Dad, Uncle or friend. Obvioulsy, after 4-5 years a person might understand that a term plan would make a better Insurance and he would be satisfied if the ULIP he would have held has given atleast comparable returns within it's peers and Endowments would be nowhere on that day. If not exactly 4-5 years, it will happen 10years down the line depending on how fierce would the regualtor and companies battles are..

A similar mistake was done a couple of years back by a player called Aegon Religare. It has come out with what a financially literate customer would love and is in line with reality..

A lovely and superb campaign "KILB?? Kam Insurance Lene ki Beemari.." This has educated many customers to a certain extent on understanding how much cover should they have and why??

But, the company should have understood that a person whose Human Life Value would have been 50Lakhs would not have enough income to pay 3Lakhs a year to take an endowment plan or ULIP that can give 50Lakhs cover. And term plan would be the only solution available at 10,000 per Annum to give a 50Lakhs cover. What happened next is a disaster for the company but, an easy sale for the industry without advertising. The term plan sales picked up across the industry and better off than what Aegon could sell

.. Why??

1.Aegon is relatively a new player in the Indian market, 2.Term plans are always compared on premium as there is no return of premium in pure term plan and Aegon is not the cheapest. If it's not the cheapest why should I go with a new player. And the first thing many customers did was to check quotes from LIC as well as other major palyers and settled on one. Yes, this campaign gave Aegon a really good brand coverage but, the brand image it gained versus the potential business it lost doesn't seem too good for me. What should have been the strategy??

It should have built up a decent brand name and then post that come out with KILB offering the cheapest term plan or atleast a competitive quote.Coming back to LIC, neither does it have low quotes for term plans nor does it have the best or competitive returns on it's ULIPs?? What would the customer be happy for 4-5/10 years down the line. For paying higher premium on term or for not getting comparative returns on ULIPs or for holding those endowments with least returns?? And is it worth to come out with a campaign "Why go anywhere else?" in such a situation similar to that of Aegon 2years back. It could have definitely come up with better products and offerings before saying, "why go anywhere else??"

And the same goes with Indian Railways.. With it's new campaign on cleaner and better railways to attract tourists during CWG is wonderful.. But, is it cleaner and better. The reality doesn't seem to be so. And should the tourists really carry back an image that was quoted by an Indian official last month, "Everyone has different standards of cleanliness.." And Mr.tourist, the wonderfully red colored pan marks and the over dumped garbage can are the extra cleaner and better railways and this is our standard of cleanliness???

If it comes to a new branding exercise within the country, apart from cleanliness are those train accidents / derailments once in every week as well as the controversy surrounding the ad that “No female is included in the human train”, “The ad is copied from an old ad for Hong Kong railways”

Why can't the LIC come on with better solutions and advertise or Why can't Indian railways cleanup and then advertise it as cleaner and better?? Why are they getting on to the same levels like BSNL (the broadband campaign & the agony of Internet connection) that takes 10days to a month to get a broadband connection but, advertises as the superior one with a bad quality??

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Might be some things never change...

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