Traditional endowment products are often criticized for providing low value to the poor as these vehicles lapse when people neglect to make a contribution, and hence people lose most of their contributions that have been made up to that point. In mid 2008, Max New York Life launched a Max Vijay product that challenges this popular view, and as such, numerous competitors on the Indian market.
Max Vijay’s life insurance product is a 10-year life insurance policy with a long-term savings component, with a minimum initial premium payment of 1,000 rupees and a maximum death benefit of five times the premium payments received in the case of natural death and ten times the premium received in the case of accidental death, up to a maximum of 50,000 rupees for the cheapest variant. The Max Vijay policy specifies that 60 per cent of the initial payment and 90 per cent of subsequent payments be invested in government securities and equities by Max New York Life, with the rest covering the premium for the life insurance component. Investment earnings are added to the policyholder’s account each year and are guaranteed by Max New York Life; policyholders can start withdrawing funds from the policy after three years. Policyholders are required to pay surrender fees if they close the policy completely, with fees declining over the life of the policy. After ten years, the policy terminates and the account balance is paid to the policyholder as a maturity benefit. If the policyholder dies before ten years but after six months of the effective date of coverage, the beneficiary receives the account balance and the death benefit amount.
Market research on insurance purchase revealed that the four main reasons people in India did not purchase insurance included high regular premiums, fear of policy lapses, aversion to health checkups, and dependence upon an agent (i.e. when the client moved or the agent departed, the link was broken). The Max Vijay product was designed to overcome these challenges. The policy can be “topped up” periodically at the policyholder’s discretion, with amounts as low as 10 rupees. The clients are not linked to a specific agent and can recharge their policies in many outlets in their vicinity such as small shops, microfinance institutions, government kiosks, etc. In addition, the policy cannot lapse as irregular contributions are accepted.
Date of final Learning Journey update: Feburary 2012