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As we reflect on the past 18 months of the pandemic, we are struck by a stark truth. Life is uncertain. An unfortunate accident, medical crisis or devastating illness can strike us at any time. And if we don’t prepare adequately on time, the premature death or serious illness of a loved one can expose a family to financial vulnerability and completely derail their savings and future plans.
Awareness is increasing
Although it has been a tumultuous period, one of the positive aspects of the pandemic has been an increased awareness of insurance, particularly term and health insurance. People began to understand better the importance of investing in insurance to financially protect the family against the uncertainties of life.
In addition, families showed more interest in investing in financial instruments such as insurance due to higher disposable income during this period due to the decrease in lifestyle expenses. We have seen increased interest and increased inquiries across the country, not only in subways and Tier 1 towns, but even in Tier 2 and -3 towns and small towns.
The demand for pure protection plans has increased over the past few years as people have gained better knowledge and understanding of this category of products. Premature deaths during the pandemic have led to a further increase in demand for these plans.
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However, with the devastation caused by the Covid, especially during the second wave, reinsurers have been hit hard by the surge in claims and have been forced to raise the rates of term plans. Prices for term plans in India were the best compared to the rest of the world, so reinsurance was very aggressive in India. With this hike, rates rose 20 to 40 percent across the board.
However, the exact amount varies depending on the life insurance company, the reinsurer, and the volume of business the life insurance company has with the reinsurer. Besides the rate hike, the underwriting process has also become stricter for term plans. Despite this rise, we still urge people to buy term plan as the first step in insuring themselves and their loved ones against any unfortunate situation in the future.
Among the other product categories, we have seen an increased interest in guaranteed products such as savings plans as well as retirement and annuity plans, in particular due to the prevailing economic uncertainty and the decline in the scheme. interest rates in the country. Interestingly, given that the stock markets have been buoyant over the past 18 months, we have also seen many new inflows and renewals of Unit-linked Insurance Plans (ULIPs).
While the peak in ULIPs comes largely from subways and Tier 1 cities where customer awareness and education about stock market trends is higher, customers in Tier 2 and -3 cities are taking the safety. in a savings plan with guaranteed and non-par return.
A veil of sadness
As the pandemic casts a shadow over job security, business success, physical and mental health and children’s education, we reached out to parents of children under 10 in 10 cities across the country as part of our #FutureFearless survey. The survey was conducted by our research partner YouGov India to understand parents’ financial planning and investment decisions made in the current scenario.
As you might expect, most parents have a solid set of dreams and aspirations for their children. Not only do they want their children to do better financially and socially than themselves, but they also encourage their children to learn new things and enroll them in various courses, especially on digital media. Children are also exposed to new and exciting fields with professional interests spanning emerging fields such as YouTuber, Scientist, Astronaut, and Virtual Reality Designer.
Main conclusions
One of the main findings was that while most people were forced to cut back on their savings and investments, this also caused them to review their financial preparation. Saving for their children’s future and milestones has become a top priority for parents, as has saving for medical emergencies.
The rising cost of education from the preschool level, coupled with the growing aspirations of parents, has prompted them to save for education rather than other life goals for their children, such as saving for marriage or starting a business.
In view of this, it offers life insurers the opportunity to continue education on the relevance of life insurance and the importance of children’s plans in reassuring parents that their child’s dreams will be realized despite challenges. unfortunate circumstances.
The survey also found that parents view life insurance as a low-risk investment tool and a reliable financial instrument to protect the family from future uncertainty. About half of monthly household income is currently spent on savings and investments, and life insurance is one of the main instruments of secure long-term investment.
Continuing to raise awareness and educate about the benefits of life insurance could help increase interest in this category. During this period, the IRDAI regulator has taken a number of laudable measures, which have benefited customers, as well as insurance players. Since the pandemic, the regulator has introduced several standard products to the insurance market such as Saral Jeevan Bima, Saral Pension, Corona Rakshak and Corona Kavach, which simplify the decision-making process for customers because of the features and options. of the product are standardized and limited.
Therefore, these plans are an entry level option for clients.
India is a severely under-penetrated insurance market and although the pandemic has raised awareness of the importance and benefits of insurance, there is still a long way to go.
Offer innovative products that meet customer needs throughout the life cycle, ensure adequate life coverage to adequately protect their family in the event of unfortunate circumstances and foster a digital first approach to improve experience and satisfaction Customer feedback are some of the steps which we can take to further boost insurance penetration in India.
The author is the MD & CEO of Ageas Federal Life Insurance
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