The success of PMJJBY teaches the life insurance industry how insurance products are designed, marketed and distributed among the masses.
There is no exaggeration in saying that Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) has struck the right chord among citizens/masses.
Last year, when Hon’ble Prime Minister launched PMJJBY, it caught everyone’s attention in the unorganized sector. So people from less privileged sections such as hawkers and domestic help realized that at last there was something which met their needs for protection. These people may not be aware of life insurance policies but they are very well familiar with the PMJJBY. No life insurance policy has ever been as popular as PMJJBY.
Let us find out what has worked in its favor and what life insurance industry can learn from PMJJBY.
Simple design: PMJJBY is a term insurance policy offering a life cover up to 55 years of age (enrolment is allowed up to 50 years of age only) . To avail the benefits of the scheme, subscribers are required to renew it every year till 55 years of age. The scheme is meant for people falling in the age group of 18-50 years. It offers a life cover of Rs. 2 lakh at a premium of Rs. 330 per annum.
This scheme has standardized features which are easy to understand unlike most insurance policies which come with a lot of complicated features and benefit illustrations. Most investors don’t read such illustrations. In fact, such illustrations are known to set unrealistic expectations and create confusion among subscribers.
Perfect execution: PMJJBY is an over-the-counter product. That means eligible subscribers can enroll into the scheme through banks just like they open savings bank account. All they need to have is an Aadhaar linked bank account to avail the benefit of this scheme, that’s it. Aadhaar would be the primary KYC document required.
Delivery: Many insurance companies are offering PMJJBY as it is a profitable proposition for them. They can benefit from large volumes. Also, distributing banks are earning decent commissions. It is certainly a win-win situation for all stakeholders.
Effective communication strategy: The success of any financial product depends on how it communicates with people. The government knows it well and they have come out with a strategy that talks to people in their language. Many people felt that this was the product they were looking for. Most of their communication appeals to people to spare a rupee a day to avail the coverage of Rs. 2 lakh for their family.
Easy claim settlement: Participating banks are the master policy holders and they in consultation with the respective life insurance companies have formulated a simple claim settlement process which would reduce the hassles for subscribers. Nominees just need to fill up a claim form with the supporting documents and submit it to the Bank Branch.
Unlike most of the government schemes which typically fail on the execution part, this scheme has delivered on all three fronts – design, execution and distribution.
Learning from PMJJBY, life insurers should introduce plain vanilla policies having standardized features which can be distributed over-the-counter (OTC) to increase insurance penetration.