In what can become a game changer in the Insurance market, WalMart, America’s largest retail giant has announced plans to sell health insurance in 2,700 of its 4,300 retail stores. WalMart has worked out collaboration with health comparison website DirectHealth.com which will house insurance agents in WalMart stores to help consumers pick the right health insurance plan. The retail giant plans to sell both individual health plans and private Medicare policies in the coming weeks making WalMart stores offer customers a complete product offering for all their healthcare needs. While the success and the impact of such a move by WalMart will be judged over time, once the retailer starts selling insurance plans in real time, there can chances that Indian retailers may seek to walk the same path by joining hands with other insurance resellers in the near future.
Referral Earnings a Good Business Opportunity for Retailers: With the increasing competition in the insurance sector, insurance companies are offering various incentives and referrals for insurance products resellers. WalMart and its partner website DirectHealth.com will not be underwriting any policies and would simply earn referral money by selling insurance policies of various insurance service providers. This business plan is easy to replicate in India with insurance companies facing the heat in expanding their consumer base. Since retail chains in India are not as big as WalMart of, insurance agents located in Indian stores can give far more personalized attention for each insurance seeker.
Price Performance ratio remains a Mystery: Unless the retailer giant WalMart is well into the thick of selling insurance policies in its stores scheduled for this month for Medicare plans and November 15 for individual health plans, it would be hard to comment on the pricing structure of the insurance plans. With two resellers involved in the selling process, insurance plans sold at WalMart could well be priced a tad higher than the ones available directly with insurance service providers. Of course the insurance seekers gets the advantage of a personalized detailed plan with an insurance agent explaining each aspect of the insurance policy to the client before selling of the policy.
Indian Insurance Companies Seeking Innovative Ideas: With the relaxing of the FDI norms in the Insurance sector, Indian insurance companies are now looking at long term growth prospects in India with innovative plans and ideas to increase their market share. If the WalMart retail plan succeeds in the American stores, chances are the Indian insurance companies may well tie up with a number of smaller retailers and multipurpose stores for selling insurance policies in their conventional brick and mortar stores. Do not be surprised if you find yourself shopping for a health insurance policy or a life insurance plan by placing the policy documents in your shopping cart in the neighborhood retail store.
Retailers selling finance products: Pros and Cons
Retailers selling finance products are not very new in the West. Hypermarkets selling life insurance policies, prepaid ATM cards, home renovation loans etc have advantages as well as disadvantages in this ‘shadow banking’.
Advantages: Speaking about advantages, the first one is that it increases the convenience of buyers. It also helps in increasing financial education to the under-banked population of the country, and people who uses banking very less banking services. It will also make buying banking products hassle free, especially for the senior citizens, who find it difficult to walk into a bank branch or buy a product online. Customers who are fed up with banks will also find this option good.
These moves are also likely to create innovative products like pre-paid cards which are not attached to banks.
Disadvantages: Mis-selling can be the biggest disadvantage of this trend. With a need to push products with higher incentives, mis-selling can happen, especially in case of life insurance. If mis-selling is happening through a bank or with an insurance company, there are legal authorities like IRDA and Bank Ombudsman to take care of it. But if retailers start mis-selling of insurance the question arising is that whether it comes under the jurisdiction of the same authority or consumer court?
The second disadvantage that is in question is whether the pricing will be more in retail shops, as they want to turn a profit out of it and with loose regulations.