Private insurers taught FM on service tax

Chennai: Perhaps Finance Minister Yashwant Sinha took the cue to charge a 5-per cent service tax on life insurance premium after looking at the advertisements put up by Indias private life insurance companies.

Several private life insurers like ING Vysya Life Insurance, AMP Sanmar, Birla Sun Life Insurance and MetLife India are not inclined to leverage the most attractive feature of a life insurance policy - the benefit of tax breaks - in their communication strategy.

The companies are trying to educate the public as to why they should buy life insurance products - and that too during the months when the sales of life insurance policies reach the summit. In fact, Life Insurance Corporation of India sells nearly 60 per cent of its policies during the last three months of a financial year.

Says Birla Sun Life Insurance CEO Nani B Javeri: We dont want life insurance policies to be sold only between January and March every year. Selling three unit-linked products, he wants people to buy his products, like any other investment schemes, any time during the year.

ING Vysya, in its newspaper advertisement, depicts the three components of life cover - protection, savings and investments - as a pyramid. According to the company the first reason to have a life insurance policy is to protect and secure ones own income and his familys financial future. A person should ideally have a life insurance cover that is four times the annual income, reads the ad copy, which goes on to say that a life insurance policy helps to save money, and only as a third reason does it talk about tax-breaks.

On the other hand, the latest entrant into this sector, AMP Sanmar, in its advertisement details the heritage of AMP, Australia - one of its promoters - and talks about the features of its five products. The copy does not contain even a single word about tax-breaks. Why? Says an AMP Sanmar official: We are of the strong view that a life insurance policy should not be sold just on the basis of the tax concessions it gets.

Says MetLife India MD Venkatesh Mysore: The core message of our communication to differentiate MetLife India from competition is education. The idea is to help customers take informed decisions. As a part of its communication strategy, MetLife India is using thought starters to help potential customers ask questions about how life insurance can help ensure their very personal and individual long-term goals.

Mysore says the life insurance business demands patience and endurance, since it involves earning the trust of customers and building a long-term equity with them, wherein customers children and their childrens children look upon MetLife India as a paying proposition. It is for this reason that MetLife India rests its faith in its global positioning statement: Get Met. It Pays.