How to minimize insurance product complexities

The increasing awareness of health-related issues in the post-Covid situation has pushed people to procure insurance products as a means of safety. But it is important to give consumers accessible and readily available products, with minimal complexities.  

Several complexities exist within the Indian insurance sector. The two most important ones are: 

Product complexity: Companies should design insurance products that are easy to understand. It may not be possible to create a customized product for every single individual, but it is better to build ones that match the most common requirements.  

Complexity in sales and distribution: People residing in non-metro towns and cities may not seek insurance products on their own. This can be attributed to multiple causes, including lack of awareness, fewer insurance options, and distance between them and the insurer. 

Owing to these factors, India’s overall insurance penetration was 3.76 per cent in 2019 (life insurance 2.82 per cent, non-life 0.94 per cent). Most consumers from non-metropolitan cities can’t access insurance at all. Product visibility is another complexity specific to the Indian context, and insurers need to reach the masses to solve such complexities. 

Steps to minimise product complexity 

Although, there are various complexities a company may face, there are ways to minimise them.  

1. Product personalization and scalability: Insurance products should cater to individual needs rather than having a generic approach. Implementing a digital assistant for the agents can help create highly detailed customer profiles. Agents can match products to these profiles according to age, gender, region, language, and more. Segmenting customers based on these criteria can immensely ease the agents’ lives as they need not manually sift through information to understand customer needs.  

While personalization is the end goal, it may not be practical if the region does not have adequate access to digital equipment. In such a scenario, another method of meeting customer expectations is creating products that can scale up to customer requirements. Giving them an assessment form and figuring out which existing product matches their needs can also help reduce complexity. 

2. Bundling Products And Policies: Complexity increases as customers invest in policies from different providers for different products. To combat this scattered customer profile, companies can provide insights to customers into the benefits of bundling insurance under a single system. When all or most of their policies are under one umbrella, they need not invest their time and effort in meeting multiple providers.  

For instance, for a family of three (three adults aged 49, 47 and 21), three separate health plans from an insurer X providing a cover of Rs 5 lakh each would add up to a total bill of approximately Rs 23,328 when taken separately (premium amounts are Rs 9,921, Rs 8,976 and Rs 4,441). Alternatively, if the family chooses the bundled plan, where the whole sum insured can be utilized among the family as a group, they all will have a plan for Rs 5 lakh for a premium of approximately Rs 18,669. The family saves 20-25 per cent when their insurance is bundled. In this manner, insurance companies can make the process less tedious for the customers involved.  

3. Increased engagement with clients: For years, most insurers have tried to have a strong understanding with clients. But, be it during the moment of sale, during policy renewals, or during the claims process, often clients end up receiving long-winded documents filled with jargon, that confuse them.  

Without frequent communication and increased client-facing touchpoints, the product will remain as complex as ever. According to a PwC report, during the service and claim stage, 47 per cent of the issues are relationship-related, as interactions and processes are difficult to handle. Furthermore, 35 per cent of the challenges are related to responsiveness during claim processing.  

Insurance agents need to consistently communicate changes in policies, keep clients aware of new products, and answer their queries promptly. That is the way they can improve customer experiences significantly. Every product requires creative means to increase customer convenience and improve inclusivity.  

The author is the founder and CEO of Leadsquared. 

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.