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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Open for Comments

1 comment:

navi said...

good one..very informative.