Why ULIP mis-selling has become rampant ?
Why is there so much mis-selling of ULIP? How to avoid this mis-selling? Who should take ULIP?
The World Bank says, “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.”
Know Your Consumer
Consumer research has been the basis of every major product‘s sustained performance by successful brands. BFSI companies can adopt the positioning of being a “FMCG company with finance as the product”. The mindset shift would allow them to work in understanding the needs and wants, of the consumer segments they serve.
Indian demographics is very stratified in its composition. There are so many nuances apart from age / gender / geographic – linguistic differences, cultural aspects, etc. The risk profiling of consumers needs a deeper analysis than it is currently (wrongly) assumed. Each of the consumer categories might have different finance ‘needs’ at varying points of their lives.
Simplify products
BFSI brands have a way of complicating its product design. For increased consumer acceptance of financial products, let us not complicate the product to suit the BFSI institution. Let us simplify products for the consumer.
Customise products for different consumer segments
India being a diverse country with unique regional and occupational characteristics, and following different cropping pattern and income streams, it is necessary to have diverse products for its unbanked population. Thus, there is a need to have granular products, preferably different products / product-variants for rural areas and urban areas. Further, distinct micro-products can be made on the basis of nature of employment of people. For example, imagine the concept of monthly loan repayment (EMI) becoming weekly loan repayment; it could help those entrepreneurs having daily/weekly cash income.
Simplify product information and communication to customers
Customers need simplicity of understanding in what the product does for them and their product needs. It might be useful if the industry self-regulates itself soon, to adopt a standard policy document template like a 1 page term sheet of key terms/conditions/benefits with details including whom to call for issues or clarification.
Let consumers know their rights and responsibilities
Can the BFSI companies not hide behind fine print and font number 6 in their product-application-forms ? Simply have one page of relevant and sufficient information : what consumer rights are about that product and what’s the redressal process if they have any grievance.
Fast-track consumer grievance redressal for better trust factor
As each of the financial services regulators strengthen their public grievances redressal mechanism, the BFSI companies should work in settling the disputes quickly. And the regulators need to strengthen the dispute-award implementation mechanism.
(The writer is an independent markets commentator. Views expressed are personal)