R Doraiswamy, MD&CEO, Life Insurance Corporation and Ajay Seth, Chairman, IRDAI at an event on Tuesday in Mumbai ,
Seth raised concerns over selling long-term products without considering customer needs, questioning the rationale for selling term insurance to an 85-year old as it is primarily being positioned as a tax-efficient inheritance tool rather than risk protection.
Mumbai:Calling for a fundamental shift in the way insurance is marketed and delivered , IRDAI Chairman Ajay Seth urged life insurers to move away from fear-based selling and focus on building trust through better products, transparent service, better returns and customer-centric communication.
Addressing the CEOs of life insurance industry at an event organised by the Life Insurance Council on Tuesday, Seth said trust, not fear, should drive insurance communication.
Seth said insurers should stop relying on fear of financial hardship to sell policies.
Seth said insurers need to communicate the returns delivered to policyholders, rather than focusing on shareholder returns.
“How do we create trust?People are buying a service today which they hope they will never need. But if they do need it, it should work like clockwork.” argued Seth.
“Trust and complexity have to be improved. Convergence gap has to be addressed by the life insurers,” Seth stressed
He warned that even the best advertising cannot compensate for poor products. “Good product, poor campaign means opportunity lost. Poor product, great campaign means trust lost. The ideal combination is a good product backed by a good campaign,” he said.
According to Seth, policyholders judge insurers largely through claim settlement experiences and word-of-mouth. A single poor experience within a family or social circle can discourage many prospective customers.
Seth raised concerns over selling long-term products without considering customer needs, questioning the rationale for selling term insurance to 85 year old people if it is primarily being positioned as a tax-efficient inheritance tool rather than risk protection.
He reiterated the regulator’s suggestion that a part of key managerial personnel (KMP) remuneration should be linked to parameters such as product performance and persistency, keeping policyholders’ interests at the centre.
While individual insurers naturally promote their own brands, campaigns run by the Life Insurance Council and industry bodies represent the reputation of the entire insurance sector. Any poor customer experience therefore affects trust in the industry as a whole.
Seth urged insurers, intermediaries and brokers to introspect whether they could confidently stand behind every product they sell, every sales transaction, every service interaction and every claim settlement.
“Trust is either 100 per cent or zero,” he said. “Can we confidently recommend our own products to our own family members? If the answer is yes, then we should tell the public that this is the level of trust we have in our products.”
Seth further elabiorated that Insurance for all for him is affordable, appropriate accessible product, from an insurer, whom people trust. Is available, in all parts of the country, and for all segments of the population.Moreover,awareness, is a necessary condition, but not a sufficient condition. Awareness plus trust, will bring with it, necessary and sufficient condition, he said.
The top 10 life insurers spent around ₹3,500 crore on publicity and awareness during FY2024-25.
One of them spent 1.5% on the top line, which is a very significant number. That company had a budget double of the LIC. The insurer spent double of the LIC.
The spending reduced to about ₹2,700 crore in FY2025-26, though Seth noted that the amount remains substantial.
The IRDAI has established a Policyholder Education and Protection Fund with a corpus of around ₹800 crore. Seth said the regulator intends to utilise the interest earned from the fund to strengthen policyholder education and protection initiatives.
Seth indicated the e-market place Bima Sugam is expected to go live by September and will sell Motor, Health nad Term Life Insurance prfoducts initially.