I do not know much about the other industries, but the financial services industry has a lot of interesting behaviour…

The life insurance industry had a product called Classic Endowment Policy. This was a compulsory saving and risk cover product where the returns were a function of how well the fund was managed, how the economy did, the claims paid out, etc. etc.

This was not an efficient product according to the intellectuals. So they said hey ‘the product should be more transparent’.

Obviously they assumed that if you give all the details to the client, the client would read, understand, think and buy the product. Brilliant assumption. Completely Wrong in practice.

So now they said you should give them a simple product called ‘Term Insurance’ – which like a general insurance product will pay only on the occurrence of the event. Event being death.

Industry came out with a) term with return of premium b) term with falling insurance cover c) term to cover the home loan d) single premium term insurance.

Poor, poor investor / insurance buyer…he is still wondering what to do…

Let us accept the following:

a. If you have not sold to a wide range of customers, you do not know how the customers buy.

b. Banks have such a hold on the customer that any financial products reform is NOT POSSIBLE without the push coming from RBI. The other 3 regulators do not matter.

c. Clients will buy because somebody thrusts a form under their nose, not because they are smart and know what to buy.

d. Even the so called educated people do not know what they ALREADY HAVE in their portfolio…how the……..will they know what they need to buy.

e. Most customers have no clue about what returns they are getting on their current portfolio.

f. ULIPs are bad, and terribly expensive, BUT, it is still better than NO INSURANCE.

g. Given the margins, nobody is going to sell ‘term’ – no clue what is the intellectual solution to it. The sales solution? incentives?

h. The same CLASSIC POLICY is now being sold as ‘Sir, this is not a ULIP, and this does not invest in EQUITIES’.

lol the customer is buying. Long live the King!