scorecardresearchRead policy document carefully before buying insurance, says Subhrajit

Read policy document carefully before buying insurance, says Subhrajit Mukhopadhyay of Edelweiss Tokio Life Insurance

Updated: 28 Jun 2023, 12:53 PM IST

In an interview with MintGenie, Mukhopadhyay said that life cover must be at least ten times your annual income.

SubhrajitMukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance

SubhrajitMukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance

Customer centricity has been the central focus of the insurance industry for years now, says SubhrajitMukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance.

In an interview with MintGenie, Mukhopadhyay said that an insurance policy is a long-term instrument and therefore, it is important to make a well-informed and sound decision while choosing or after you have chosen a policy.

Edited Excerpts:

Q. Lack of awareness is a big issue that refrains more people from seeking the necessary insurance coverage. How do you think people can be educated about the importance of insurance?

Over the year, there has been some improvement in the awareness levels regarding life insurance and there is a proactive interest in certain customer segments, if not all. However, I expect awareness to improve in the coming years because there is a much wider and collective industry effort now to educate the customer. 

For instance, the “Sabse Pehle Life Insurance” campaign spearheaded by Life Insurance Council has been significant in highlighting the importance of life insurance as a foundation of your financial planning. Going forward, the regulator has also assigned certain geographical pockets to insurers, both life and general, to create a more targeted awareness approach. These efforts together will have a discernible impact in the years to come.

Q. The inability to gauge the importance of insurance is evident from the inadequate insurance coverage that many people seek. What's the best way to decide on the coverage?

Most financial advisors recommend that the life cover must be at least ten times your annual income. However, in my view, this should be looked at as a guiding point in determining what’s adequate coverage for you. Each individual has differing needs, and financial goals, and is navigating different circumstances. So, the multiplier applicable to each individual also differs. In some cases, 10 times the annual income is not enough for a life cover. Here are the key factors one must consider when determining their ideal coverage:

Income and your standard of living: Take stock of the income you are earning (salaried or otherwise), and the lifestyle you and your family are currently enjoying

Debt: What are your liabilities? This could include a score of things including a home loan, or other personal loans like education loans, credit card dues, etc.

Expected future expenses: Your children’s education, marriage, any plans to open a new business in the future, etc. must be considered

Contingencies: You can also be marred by unexpected expenses like medical exigences in the family

Remaining years of earning or your family being financially dependent on you: For young people, whose family is dependent on their income for the next few decades will need a higher life cover compared to someone nearing retirement.

These are a good start to start thinking about what could be potentially necessary coverage for you. It is also ideal to speak to an advisor who can guide you through this process, especially if you are doing it for the first time. What is important is to get started and not procrastinate. It is also necessary to keep reviewing your requirements as you progress through life stages.

Q. While investing in any kind of insurance, what is the most important factor that one must be aware of?

An insurance policy is a long-term instrument and therefore, it is important to make a well-informed and sound decision while choosing or after you have chosen a policy. Needless to say, one must do at least a cursory check of the life insurance company they are choosing. It is wise to be aware of how they fair on critical parameters like Claim Settlement Ratio, Persistency Ratio, etc. It will give you an idea regarding the quality of the said company. You can also go the extra mile and check within your social circle if anyone else is already a customer and how their experience has been with the company.

Some other factors that one must account for are:

Read the policy document carefully: Always read the policy document carefully. It is critical that you are fully aware of the benefits applicable to the policy, exclusions if any, or if there are any additional benefits that may have slipped your notice. In case you don’t understand any clause, reach out to your advisor or the insurance company directly.

Is this linked to my financial goal: While this is applicable before the purchase of your policy, ensure that any kind of insurance you are buying is linked to a specific financial goal in your life. This way, you will continue with that policy until maturity, and the chances of being disillusioned with such a financial purchase become negligible. Most insurance policies provide multiple benefits like life cover, investment returns, liquidity, tax benefits, etc. Decide for yourself which of these factors is more important for you. Remember your goals could be different from someone else and thereby your parameters should also be specific to your goals.

Discuss with your family: I always recommend discussing any kind of financial purchase with the larger family and not only your spouse. This way, the entire financial planning process becomes inclusive and your family also becomes aware of the life insurance purchases made.

Q. What are the steps that you suggest should be taken to build customer trust by insurance firms?

Customer centricity has been the central focus of the industry for years now. Be it product innovation or a general focus on improving accessibility to customers, the ecosystem has undergone significant changes.

While there is a lot of work happening when it comes to customer interface, I think a lot more has to change internally. Creating the right culture for your distributors to ensure they imbibe the right values when interacting with the customer, robust governance practices, and adequate processes that can support a strong quality of business.

For instance, several customers worry whether their families will receive the claim after they are gone. And thereby it is imperative for the insurance advisor to involve the entire family not just during the purchase process but during the entire duration of the policy. So, as a company, our work begins with simplifying, shortening, and making the claims process transparent for the customer. The industry has been on this journey for many years now. I truly believe the trust lies as much in how companies are run and not only in the way companies are interacting with customers.

Q. Insurance awareness has gone up a bit since mid-Covid. Do you feel that this trend will continue?

Covid has been a significant event in improving the awareness of the life insurance product category. As mentioned earlier, there are a lot of efforts being undertaken by the industry as a whole and it will nudge the needle forward in the years to come. But, it is a slow-moving process and we will have to keep making those incremental efforts towards educating the customer year after year.

With the presence of technology, we are also discovering newer ways of interacting with customers and meeting their specific or niche requirements. For instance, sachet insurance, and embedded insurance. We are in an interesting era, wherein both regulation and technology are bringing significant changes to the insurance ecosystem and I expect the Indian marketplace to transform itself over the next decade including how customer prioritizes the purchase of insurance.

Q. More people from tier-2 and tier-3 cities are now showing an interest in insurance products. Do you think it hints at successful insurance penetration among the large uninsured population in India?

It would be premature to make any such assumption. A lot of these government schemes like Pradhan Mantri Suraksha Bhima Yojana and Pradhan Mantri Jeevan Jyoti Beema Yojana have successfully introduced the concept of insurance to the interiors of India. This is being supplemented by the improving reach of the private sector in these markets. We have miles to go before we can confidently say that we have adequately covered these regions.

What’s more important is that insurance penetration alone is not important, it is also a question of whether everyone is adequately insured. So, the efforts have to be towards improving penetration and closing the mortality protection gap.


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First Published: 28 Jun 2023, 12:53 PM IST