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Tuesday, December 10, 2013

Bundled insurance still in demand by customers

Insurance executives said that as long as an option is given to a customer, there is no issue

Bundled insurance products that involves selling of two or more products with insurance is still being favored by customers. While insurance companies have not been pushing for these products, officials said that customer demand for these products has not waned out. "Though there have been some instances of products being missold, customers still come to us to get information about these. Hence the industry is not completely shutting out these products," said a senior private life insurance executive.  

Some of these products include free insurance cover (for first year that can later be renewed for following years) with bank account, travel insurance with any travel package, motor insurance cover with purchase of vehicle, insurance cover with home loans or health and life products bundled together in a package. In February 2012, Insurance Regulatory and Development Authority (Irda) in a discussion paper on tying and bundling had said that marketing methodology may lead to client confusion regarding the role of the distributor vis a vis the insurer. The regulator had added that bundling the insurance product with the particular product or service that is the primary business of the channel leaves the customer with no choice but to take the insurance product offered. Insurance executives said that as long as an option is given to a customer, there is no issue.

A senior executive of a private general insurance company explained that there have been cases where a customer is forced to buy insurance along, as a pre-condition, with any vehicle purchase or with other financial products and services. "This amounts to mis-selling, since the customer either does not require the insurance or does not want to buy that of a particular insurer," the official added. With respect to conflict of interest, Irda had said that the relationship could be long standing involving trust and blind faith such as with travel agencies tempting the distributor to push a product to its customer involving a bias to not only sell without considering whether the customer requires the product but sell it with a provider (insurer) bias and/or a product ( a particular insurance policy) bias. 

Earlier, though there were talks of Irda completely banning these products, the regulator has not taken any such decision. The key, as the CEO of a state-owned general insurer, would be ensure that the customer has fully understood the product and is comfortable having the insurance cover, whether or not it is offered free. "While it is easier for an insurer to push these products and deepen their market penetration, it has to be seen that the prospective policyholder is not given any false promises," he said. 

Source: BS
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