Pension Plans in India - The Need for Category Creation

Feb. 27, 2009 - PRLog -- Most people tend to think that life post-retirement is an idyllic period when one can put up one's feet up and enjoy all the things that they missed out on while they were working. Very often, however, the truth is starkly different. For many, life after retirement becomes a bit of a struggle. As regular income stops, it forces adjustments and changes in lifestyle and often the daunting prospect of dependence on others, mostly children, for support. All of this can be avoided by planning for retirement in a systematic manner and from relatively early in one's career.

In the Indian context, the need for systematic retirement planning is even more acute, given the fact that as much as 87 per cent of India's workforce of 425 million has no formal pension cover. The absence of any form of meaningful social security further compounds the problem and if we add to this mix rising inflation and increasing costs of healthcare and a substantial increase in average life expectancy in the coming years, retirement begins to appear less idyllic. People begin to dread rather than look forward to their retirement. Given this scenario it is no surprise that Pension Plans or Retirement Solutions are finding favour with consumers and are increasing as a proportion of life insurance sales. However, in speaking with consumers, it is quite evident that there is still a lack of information and education with regard to the category.

In a research conducted by AEGON Religare Life Insurance across town classes, SEC and geographies amongst both pension plan buyers and non-buyers a few stark facts emerged.

1. At a younger age retirement is a distant milestone and younger consumers are more concerned with short-term goals - discretionary spending, durables, automobiles etc. The thought of planning for retirement does even cross their minds at this time.

2. The thought of retirement planning strikes most people later in their lives, when they are in their mid to late thirties or even in their early forties. At this point of time the saving required to meet retirement planning targets becomes quite large.

3. Consumers have no means to estimate the amount that would be required to live a similar lifestyle post-retirement by looking at current expenses. Hence post pension plans are bought basis vague approximations, or even worse, on the basis of what they are comfortable writing a cheque for.

4. Consumers understand that inflation diminishes the value of their money but have no means to estimate a long-term inflation rate and the impact of the same.

5. Interestingly, pension plans were seen to be means of taking care of the daily necessities of life. In a RKM (Roti, Kapda aur Makaan) context the pension plan was expected to only cover the 'R' aspect. A pension was not seen as the means of buying or indulging in high-ticket products.

6. Most strikingly, consumers were very clear that they would not like to be dependent on their children post-retirement. Consumers did not expect their children to look after them and were not comfortable with the scenario. A number of consumers mentioned the film 'Baghban' and the need to avoid being in the same situation. This is definitely a changing social trend and is likely to impact the growth of the pensions market, now, and in the future.

From the research findings it was quite clear that the market for pension products was large and evolving. The research also threw up other points that helped in defining some of the features of the product.

1.Since a 'pension plan' was seen by many as the primary means of retirement planning, buffered by other modes such as provident fund, term deposits, other investments and small savings, there was a great demand for 'safety' and 'security'. This insight made us, at AEGON Religare Life Insurance; create a 'lifestyle' fund that adjusted the proportion of the premium invested inequities every year to reduce this exposure with increasing age. During the last 3 years of the plan prior to the selected retirement age the entire corpus of the fund is shifted to safer investment options to protect customers from unforeseen market shocks.

2. Consumers also expressed their inability to pay a large lump-sum premium. Hence we offered, in fact encouraged, systematic monthly saving in the product. As actor Irrfan Khan says in the advertisement for the AEGON Religare Pension Plan - "Har Mahine Thoda Thoda!"

The key challenge for a new brand in the insurance space is getting out a consumer-relevant message and saying it differently from the competition. With more than 20 life insurance companies in the market creating differentiation is critical. Differentiation, or lack thereof, can make or mar a campaign. In looking at the pension or retirement planning category a few things stood out. Firstly, most pension campaigns talked about or depicted gloriously happy retirement years, but showed consumers no way of achieving this ecstatic state. Given the lack of customer knowledge, as evidenced from research, the largest opportunity for AEGON Religare Life Insurance seemed to be in educating the customer about the correct way of going about planning for their retirement. We had followed a similar strategy during the launch of the company as we educated consumers about the perils of 'under-insurance' through the K.I.L.B. or  "Kum Insurance Lene Ki Bimari" campaign in August 2008.

The other task was to set the context for the campaign in a way that would make it stand out and be noticed. This was relatively much easier, since inflation had emerged as such a major consumer concern during the research.

Our mission was thus to educate consumers about the right way of going about planning for their retirement in the context of inflation continuously diminishing the value of their money. The creative challenge was of course to make this credible, relevant and engaging.

After much internal debate between us and the agency, Contract Advertising, we decided to continue with Irrfan Khan for this campaign after the immensely successful K.I.L.B. campaign earlier.

The context of inflation was highlighted using 'everyday' items such as milk, petrol, cooking gas, medicines, public transport and even a shoe shine. Prices were calculated for these items 20 years in the future and used to jolt consumers into sitting up and taking notice. After a dose of 'future shock' they were brought back into the present asking them to get in touch with AEGON Religare Life Insurance to get to know their exact pension amount.

The advertising campaign for AEGON Religare Pension Plan has taken a consumer view of the pension and retirement planning market and used a differentiated, rational and hard-hitting message to drive the point home. The campaign which broke on 5th January 2009 in television, press, and out-of-home and online has, in the first 3 weeks, had 39,535 consumers contact AEGON Religare Life Insurance out of which 10,642 consumers have agreed to meet with sales representatives to hear a sales pitch. In January itself, in the month of launch, the AEGON Religare Pension Plan contributed more than 15 per cent of the new business premium for the company.

It appears quite evident that there is great potential in the pensions market in India and one of the ways to tap into this potential is through the effective use of consumer insight to create a differentiated message in a highly competitive category.

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Life Insurance Company - AEGON Religare Life Insurance Company provides protection, savings, ULIP, child, retirement plans. Launched KILB - Kum Insurance Lene Ki Bimari campaign in India.Please visit http://www.aegonreligare.com/">