It is a fact that needs to be universally acknowledged that a young man with a fairly good income would necessarily be required to protect his potential for generating wealth over a period of 30-40 years. It is an unavoidable necessity because no young man or woman earns for himself or herself. As one grows in one’s vocation, he/she grows in his/her responsibilities as well.
Financial security of the spouse and parents is one of the most important social obligations for anyone; but with passage of time, the responsibility gets extended to securing aspirations of the family, especially regarding the children. It would, therefore, be a myopic approach to one’s financial planning if some one ignores the need of life insurance because he is young and healthy.
Ideally speaking, one cannot ignore or overlook the most crucial component of financial planning, which is provided by life insurance. In fact, the young people need it more as life insurance creates an umbrella of security for all dependents during the most happening period of one’s life. If one looks around, he would find that the society is full of episodes that not only leave families emotionally shattered, but also financially wrecked. Life insurance is offered to customers in variety of forms. Products are designed to enable the policyholders honour their obligations at different stages in life. The utility of life insurance goes beyond one’s working life. It supports the policyholders when they stop earning by providing a large corpus of funds to ensure a monthly cashflow.
Governments all over the world focus on life insurance as an important ingredient of financial sector. It helps the economy by channelising savings of a large number of people for investments in development activities; but more importantly, life insurance strengthens the socio-economic fabric of society by providing a self-financed social security network. Therefore, it is all the more imperative to popularise life insurance among the youth in India. Their population is increasing day by day; they are ambitious, mobile, adventurous and inclined to plan for a fulfilling future. Their life style is changing fast and there has been a total transformation in regard to handling personal finance.
Before the liberalisation of the economy, a bread-earner used to consider buying a house when he would be approaching retirement; today, he buys a flat even before his wedding. But the latest phenomenon exposes families to huge debt burden. This makes life insurance all the more important. Therefore, it is pertinent to evaluate our present market environment, relevance of present market practices and product design, distribution strategy and the regulatory framework. We also need to assess whether companies are able to cope up with the demands of the youth.
So far, there has been very little effort in our country towards creating awareness about life insurance. Companies spend money on training ?how to sell? life insurance, but not on ?why to buy? life insurance. Once I conducted a sample survey of employees of my organisation. I found it was too low to be believed. This proves that the ?why buy? factor is completely missing. On the other hand, industry leaders often confuse advertising with educating. Both have different functions. I believe that in view of the massive young population gradually entering the work force and consumer segment, the insurance education has to be imparted as part of the school curriculum.
Like lessons in personal hygiene, there should be lessons on financial hygiene of an individual or a family. For those who have already crossed over to the consumer segment, it should be made obligatory for companies to impart such education at workplaces.
Insurance can be an important deliverable in programmes in financial planning. Recently, the Insurance Regulatory and Development Authority collected some data on customer education. It is important that the existing customers are educated to get full value for their money in a hassle-free manner. But the regulator would do great service to the cause of life insurance if some schemes are devised to impart education to potential customers.
This will help curb mis-selling and will also create demand from the burgeoning young population. It is high time the industry reverses its own perception about its product and business. Life insurance needs to be repositioned from a push product to a pull product and this is possible through the innovative approach to educate the prospective buyers. Both market and marketing can be subjected to a total U-turn. Buying a bottle of water was unthinkable in 1990 as levying tax on salt was in 1930.
The writer is MD & CEO (retd), Star Union Dai-ichi Life Insurance
