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    The Hindu

    Life insurance products get a fillip during pandemic

    There has been a rise in awareness about the benefits of insurance, but the sector still has a long way to go

    As we reflect on the past 18 months of the pandemic, we are hit by a stark truth. Life is uncertain. An unfortunate accident, a medical crisis or a devastating illness can strike us at any time. And if we do not make adequate preparations in time, a loved one’s untimely demise or critical illness can expose a family’s financial vulnerability and completely derail their savings and plans for the future.

    Awareness increases

    While it has been a tumultuous period, one of the positives that emerged out of the pandemic was an increased awareness about insurance, especially term and health insurance. People began to understand far more about the importance of investing in insurance to financially secure the family against the uncertainties of life.

    Further, families displayed more interest in investing in financial instruments such as insurance as a result of a greater amount of disposable income during this period due to decreased spending on lifestyle expenses. We have seen enhanced interest and increased enquiries across the country, not just in metros and tier-1 cities, but even in tier-2 and -3 cities and smaller towns.

    The demand for pure protection plans has been growing over the past few years as people gained greater knowledge and understanding about this product category. The untimely deaths during the pandemic resulted in a further surge in demand for these plans.

    Underwriting process

    However, with the devastation caused by Covid, especially during the second wave, reinsurers were badly hit by the surge in claims and were forced to hike term plan rates. Term plan prices in India were the best compared to the rest of the world, so reinsurance was very aggressive in India. With this hike, there has been a 20-40 per cent rise in rates across the board.

    However, the exact amount varies depending on the life insurance company, the reinsurer and the volume of business that the life insurance company has with the reinsurer. Besides the hike in rates, the underwriting process has also become more stringent for term plans. Despite this hike, we would still urge people to go out and purchase a term plan as the first step in insuring themselves and their loved ones against any unfortunate situation in the future.

    Among other product categories, we have seen greater interest in guaranteed products such as savings plans as well as retirement and annuity plans, especially due to the prevailing economic uncertainty along with the falling interest rate regime in the country. Interestingly, because the stock markets have been buoyant over the last 18 months, we have also seen a lot of new in-flows and renewals of ULIPs (Unit-linked Insurance Plans).

    While the spike in ULIPs has largely been from metros and tier-1 cities where customer awareness and education about stock market trends are higher, customers in tier-2 and -3 cities are taking safety in a guaranteed return, non-par savings plans.

    A pall of gloom

    With the pandemic casting a shadow over job security, business success, physical and mental health, and children’s education, we reached out to parents with kids under the age of 10 years in 10 cities across the country as a part of our #FutureFearless survey. The survey was conducted by our research partner, YouGov India, to understand the parents’ financial planning and investment decisions taken in the current scenario.

    As one might expect, most parents have a strong set of dreams and aspirations for their children. Not only do they want their children to do financially and socially better than themselves, but they are also encouraging their children to learn new things and enrolling them in various courses, especially on the digital medium. Children, too, are exposed to new and exciting fields with career interests expanding to emerging domains such as YouTuber, scientist, astronaut, and virtual reality designer.

    Key findings

    One of the key findings was that while most people were forced to cut down on their savings and investments, it also made them relook at their financial preparedness. Saving for their children’s future and milestones emerged as the top priority for parents, along with saving for medical emergencies.

    The rising cost of education right from pre-primary levels, coupled with parents’ growing aspirations, have driven them to save for academics over other life goals for their children like saving for marriage or setting up a business.

    Considering this, it provides an opportunity for life insurers to further drive education about the relevance of life insurance and the importance of child plans in reassuring parents that their child’s dreams will be met despite any unfortunate circumstances.

    The survey also revealed that parents consider life insurance a low-risk investment tool and a reliable financial instrument to cover the family against any future uncertainties. Around half of the monthly household income is currently being spent on savings and investments, and life insurance is among the top instruments for secured long-term investment.

    Continuing to drive awareness and education around the benefits of life insurance could help to boost further interest in the category. During this period, the regulator, IRDAI, has taken a number of laudable steps, which have benefited customers, as well as the insurance players. Since the pandemic, the regulator has introduced several standard products in the insurance market such as Saral Jeevan Bima, Saral Pension, Corona Rakshak and Corona Kavach, which simplify the decision-making process for customers as the product features and options are standardised and limited.

    Hence, these plans are an option at the entry level for customers.

    India is a severely under-penetrated market for insurance and while the pandemic has brought about increased awareness about the importance and benefits of insurance, there is still a long way to go.

    Offering innovative products that cater to the life-cycle needs of the customer, ensuring adequate life cover to suitably protect one’s family in case of any unfortunate circumstances, and fostering a digital-first approach to enhance customer experience and satisfaction are some of the steps that we can take to further drive insurance penetration in India.