New products of Non-Life Insurance
Non-life insurance has invented new products to meet the different requirements of customers. The new products are Mediclaim Insurance, Terrorism cover, Janata Personal Accident; insurance for plantations, cattle, pump sets, Hut Insurance, Social Security Scheme.
Many insurers feel that it is prevalence of tariff coverage that prevented the growth of product innovation.
The lack of market research, consumer behaviour, inability to identify customer ‘needs and their buying habits and the lack of actuarial talent in non-life insurance have inhibited promoting new products.
The future of market innovation lies mainly with the new players. The cost of operation will be reduced considerably. Bringing down transactional and distribution costs and adding value to current and future products are expected to popularise new products. Product innovation is bound to take off in a big way.
It is another new game in the competitive arena, which would be more vigorously fought in the post-detariffication era.
Insurers have to create need-based and differentiated products to suit various segments and within those segments, offer necessary choices and options to suit target customers.
Design and pricing of products are based on certain basic requirements in the context of consumer choice, safety and competitions.
Role of NGO’s and Self Help Groups :
Insurance is expected to increase with the help of NGOs and Self Help Groups (SHGs). It is for the insurance to come forward to find out the SHGs who can undertake insurance business.
Risk Evaluation and Product Formation :
The premium is fixed after proper evaluation of risk. Clear and transparent cover is valuable to the insured who get cover insurable risk. Standard clauses across policies should be used to help customer understanding.
Products should be developed with the compliances of IRDA (Production of policyholders’ Interests) Regulations 2002. Terms and conditions should be fair between the insurer and the insured.
The product is innovated bases on the market needs and competitive position. The evaluation of risk bases on costs as stipulated by the actuarial assessment.
The product is sub-classified and segmented as per market requirements. Each product has operative clause, the schedule, exclusions, general conditions and warrantees. There are several other clauses such as cancellation, renewal, claim, settlement processes, dispute resolution and grievance redressed mechanisms.
Risk is insured on the basis of experience of rating or exposure rating based on circumstances, internal tariff rate, packaged products and insurance of large risks. In non-trifled, rating is done on the basis of available data of industry, pricing decisions and policy terms.
The actuarial experience and rate components are evaluated to frame rate of the product. The pricing covers all costs and return on investment. The loss-calculation essential for determination of premium. The price cutting is resorted only in the hope of image-building which helps repositioning, repackaging of the product, used of temporary discounts, increased publicity and advertising.
The future of product development is very bright in the detariff era. Before pre-nationalisation period in 1972, the product development was not done as the insurers followed the practices of American and British insurers.
After 1972, the entire conduct of insurance was vesting into the holding companies of the General Insurance Corporation of India.
The GIC with the help of the Tariff Advisory Committee (TAC) regrouped the existing products in more than 130 products. It has introduced a lot of products. A Mediclaim Policy was introduced in 1980 with great success.
During the post-liberalisation private companies brought new idea to the insurance industry and a lot of product has taken place.
The insurers have ample scope of designing new product and redesigning the old product to meet the individual requirements of the buyers. The future of non-life insurance exists in:
1. Combination of health and accident as well as life cover.
2. A first loss policy of households.
3. A multi-year policy for motor-vehicles.
4. Consequential loss policies.
5. Insurance of various products, property and business machines as well as industrial inputs and outputs.
6. Agricultural inputs machine and outputs.
7. Work-in-progress of industrial and agro-bases industries.