Indian market: Product clutter and revenue

"The 80:20 rule strongly applies to Indian insurance market. In our business, 8-10% of products contribute 90% of volumes we generate" says Mr. Yashish Dahiya, CEO of PolicyBazar, an online insurance comparison site.

As reported by Economic Times, a handful of products are contributing to a majority of premuims in the Indian insurance market. Indian insurance market is inundated with a plethora of products catering to a varied classes of consumers. As per an estimate by insurance distributors, over 50% of insurance products in the market are dormant, i.e., without any revenue generation / sales.

There are many reasons for this imbroglio. Some of them are:

• Lack of product awareness among retail and SME customers
• Successive launches of newer products
• Old wine in new bottle - Lacking innovation
• Insufficient training to agents and other distributors
• Absence of alternate / new channels of distribution

While it is true that the presence of varied products would provide an opportunity to customers to choose products of their choice and the ones that suit their need of the moment, it might sometines clutter the market and provide counter-productive. This is where marketing and distribution departments play a key role in promoting the product and creating awareness amongst the customers.

In any product launch one can observe two main points:

1. Replicate product - to cash in on the market share of the popular product in the market
2. Innovative product - based on 'first to market' principle. But this too has a lead time, will soon be usurped by a rival product

In any case the role of propagating the new product cannot be undermined. In insurance where time and money are invested and closely linked to the customer's life goals, it would require professionalism (right advice) and expertise (product knowledge). Launching products at regular intervals has been a popular strategy to retain market share if not increase it. The timing of such products and their spacing while launching is very important. A fresh, innovative and meaningful product would definitely get its due more than a replicated one.

In the present market, most of the business is channel-linked and thus requires distribution channels to be robust, stable and trustworthy as financial advice goes hand in hand with selling. This would require proper training of distributors and strict adherence to competent qualifications. They should be adept with most of the products of the stable and definitely with the newly launched products. Lack of it would reduce the penetration of new products and thus reduced sales.

Alternate distribution channels would add the required reach for insurance companies and can be product specific tie-up thus developing a niche product-channel arrangement. This would require lot of groundwork in ascertaining the relationship between the two and revenue-sharing models. Once established, this could prove very effective. Ex: Bancassurance, banks for mortgage insurance (home insurance with home loans). Internet is an up-coming channel in India at present with a lot of comparator sites leading the way.

New products, no doubt,  would run high on expenses and may eat into the profitability of other products, but if managed well, could prove to be a star product in terms of reach and revenue generation