Insurance Isn’t Becoming a Commodity. Buying It Is.

Just fifteen minutes back, my phone rang. “Sir, I’m calling from ______.” (A reputed brand in India. The anonymity is intentional.) It’s one of those names that sits on a bank, an asset management company, a general insurer and a life insurer, all at once. So I asked the obvious question. Which one? He repeated the brand. I asked again. He repeated it again. Only when my tone sharpened did the answer arrive — the life insurance company. And then, without a pause, straight into the pitch. A guaranteed return plan. He didn’t ask my age. Or whether I have dependants. Or what cover I already hold, what loans sit against my name, how long I plan to stay invested, or whether a guaranteed return plan was remotely right for someone in my situation. Not one question. And he wasn’t doing anything unusual. He was doing exactly what he had been trained, scripted and targeted to do. I’m sure he’ll come out with flying colours on his supervisor’s review. Now, the headline question Look at how this industry talks today. Every intermediary pitches on price. Even insurers now position themselves on how much cheaper they are than the next one. Price has become the entire conversation. A colleague from our IT team showed me his shortlist recently. Three health policies for his family. Same sum insured, near-identical benefit tables, sorted cheapest first. He had picked the one at the top, and he felt clever about it. After two decades in this industry, when someone asks me “which one should I take”, I’ve stopped answering that question. I ask a few of my own instead: What would a week in an ICU cost at the hospital closest to your home? If you’re admitted for something serious, how much of that bill will this policy actually pay? And what happens to your family’s monthly income if you don’t come home at all? Most people don’t know. The screen never asked. And the screen is where the decision had already been made. That’s what struck me about the phone call. A comparison page and a cold call sit at opposite ends of this industry, and they make exactly the same mistake. Neither asks a single question about the person on the other side. One sorts by price. The other sorts by whatever is on this month’s campaign sheet. Both hand over a product before anybody has worked out what the problem is. That is what commoditisation actually looks like in insurance. Not cheap products. Thoughtless ones. Yes, it is happening My take. Feel free to disagree. Product wordings are converging. The regulator has actively pushed standardised, easy-to-understand products so buyers aren’t drowning in variants. Digital distribution has collapsed the cost and time of a transaction. Comparison-led buying is now where most retail journeys begin. And with shared industry infrastructure taking shape, even the rails are becoming a common utility. When the product looks the same, the journey looks the same and the rails are shared, price becomes the only visible difference. That is textbook commoditisation. Anyone arguing otherwise is arguing with a screenshot. But look at what the screenshot leaves out. Two health policies. Same sum insured, same premium bracket. One carries a room-rent linked proportionate deduction. The other doesn’t. On the day you buy, that difference is invisible. On the day you claim, it shows up as a cut applied not just to the room charge, but across the entire hospital bill. Nobody agreed to that. Nobody was shown it either. Underwriting varies the same way. What one insurer declines outright, another accepts with a loading. What one treats as a serious non-disclosure, another settles without a murmur. That sits in the claims culture of the company, not in the brochure. None of it appears on a comparison page. Not because anyone is hiding it, but because it isn’t a number you can sort a column by. But insurance can’t actually be a commodity A commodity has two properties. One unit is the same as the next, and you can judge the quality when you buy it. Steel. Wheat. A litre of diesel. Insurance fails both. Some things you can judge before you buy — a shirt, a phone. Some only after you’ve used them — a restaurant, a school. And some you can barely judge even then. Insurance is the third kind. You aren’t buying a product. You’re buying a promise, priced today and tested years from now, usually on the worst day of your life, when you are in no state to read a forty-page wording. So what has actually been commoditised isn’t insurance. It’s the transaction. And that part is real progress — buying a policy once meant a physical form, a medical appointment and a week of follow-up. Today it takes minutes. The mistake wasn’t making the purchase easy. It was assuming an easy purchase meant a complete decision. That assumption has a price. When price is the only visible variable, underinsurance stops looking like a problem and starts looking like a smart buy. A ₹5 lakh family floater in a metro today isn’t a bargain. It is a deductible with a marketing budget. The customer feels clever for four years and cheated for the rest of his life — and he has a point. Nobody lied to him. We just never showed him the number that mattered. We usually describe India’s protection gap as a distribution problem. Not enough reach, not enough advisors, not enough awareness. I’d argue a good part of it is something else entirely — millions of purchases that were perfectly valid, made against the wrong question. Which brings me to the analogy I keep returning to. Paracetamol is a commodity. Medicine is not. The chemist has been commoditised, and thank goodness — but nobody walks into a pharmacy, describes chest pain and asks which strip is cheapest. We understand instinctively that dispensing and diagnosis are two different things, and that getting the second one wrong makes the first one pointless. In insurance, we merged the two and called it convenience. So does that phone call still work? Let me go back to the gentleman who rang me. No diagnosis, no questions, straight to a guaranteed return plan. That method has been the backbone of life insurance distribution in this country for as long as most of us have been in it. Does it still pay? Honest answer, and it’s an uncomfortable one. Yes. Well enough. Well enough that the call gets made. Well enough that the model survives another budget cycle. It converts at a small rate, and at enough volume, a small rate is a business. But look at what “working” means here. It works at the point of sale and fails at every point after it. Persistency is this industry’s annual confession — we publish it every year and carry on regardless. A guaranteed return plan sold to someone who actually needed protection tends to get abandoned a few years in. The customer loses money. The insurer loses the customer and the acquisition cost. The advisor moved on to next month’s target long ago. Nobody in that chain ends up better off. And the call still gets made again tomorrow. It works as an acquisition tactic. It fails as a business model. We measure the first and quietly write off the second. The way out isn’t a better script Look at what that caller actually had to work with. The only asset he had was the brand. He led with it, repeated it and hid behind it, because it was all he had. He couldn’t differentiate on the product — a guaranteed return plan is a guaranteed return plan. He couldn’t differentiate on advice, because there wasn’t any. So he borrowed trust from a brand name and hoped. That is what selling looks like when the product has been commoditised and the advisory layer was never built. And it gets harder every year, because the man on the other end of that call can check the product in thirty seconds on the very phone he’s being called on. So the way out isn’t a better script. It’s a different first question. Not: “Sir, may I tell you about our guaranteed return plan?” But: “What happens to your family’s income if you don’t come home tomorrow?” The second question is much harder to ask. It needs training the first one doesn’t. It converts less on the first call and far more over a relationship. And it cannot be replicated by a comparison screen — which is the most important competitive fact in our industry right now, and most of us are ignoring it. In practice, it means making the invisible variables visible before the sale, not after: How much cover does this household actually need, given its income, dependants, loans and city? What exposure is being covered, and what is quietly being left open? What in the wording will bite at claim stage? How does this insurer behave when a claim is contested? Distribution should be fast, cheap and frictionless. It has earned that. Advice should not be generic, free-floating and sorted by premium. Those are two different layers, and we’ve been pricing them as one. Diagnosis before prescription isn’t a philosophy. At this point it’s a survival strategy. So — is insurance becoming a commodity? The premium already is. The policy document is getting there. The buying journey certainly is, and I don’t think that’s reversible or even worth reversing. But the decision behind it never will be. No two households carry the same exposure. A 34-year-old with a home loan and ageing parents is not the same risk problem as a 52-year-old with no debt and a grown-up child — even when the two of them are sold the same product. So the real question isn’t whether insurance is becoming a commodity. It’s whether we will let advice become one. Because that is the one layer a screen cannot copy. That gentleman will call somebody else before the day is out. He’ll open with the brand again, because that’s what he’s been given to work with. He isn’t the problem. The fact that we handed him a script instead of a diagnostic is. One question for those of you who run distribution — once you account for lapses and replacement cost, does that call still pay for anybody?