We are well aware of the fact that how this pandemic had affected the lives of many and bought an unprecedented change in the Insurance industry. The implication of social distancing forced businesses to switch from offline to online. People started to value their lives more than ever and their habits, needs, and expectations changed drastically. A year before the pandemic, only a few percentages of people showed interest in buying a Life Insurance or a Health Insurance cover. The majority of the people considered buying Life Insurance as an unnecessary expense and most of them don’t understand the importance of such cover. The reason behind such misconception about Life Insurance is that:
- Many think that they are healthier enough to manage the expenses of self and their loved ones.
- An enormous number of Life Insurance products makes it difficult for them to choose from.
- The benefit of Life Insurance is experienced only after a long period or during an unforeseen event.
- Why spend on Life Insurance cover when my employer pays for my life.
These are some of the few reasons why people hesitate
or consider Life Insurance cover as an unnecessary expense. Things are
different now and especially after the pandemic, people have realized how a
life cover, not only protects a family from any unforeseen event but also
provides a feeling of mental peace. The impact of COVID-19 has made people more
anxious about themselves and their family members. People have witnessed how a
Life and Health insurance product has proved to be an instrument of financial
aid for families who have been afflicted during the pandemic.
Primary Concerns during Lockdown:
India being a country with a very low Insurance penetration rate, the pandemic has opened the eyes of many uninsured population to consider Life Insurance as a necessity and not as an unnecessary expense. After the pandemic, more and more people are being aware of the importance of having an Insurance cover, be it Life or Health. Now, Life Insurance is considered as a necessity to tackle some of the unforeseen happenings in the near future. As per a recent study conducted on the various concerns associated with an individual, here are some of the points to ponder on:
- Self and Family’s Health
- Long-term financial protection for Family
- Employment Security
- Enough liquidity or Cash in hand
These were some of the main reason which made Life
Insurance cover the hot topic post pandemic. Even though, many people are well
equipped with their financial health but what makes them extremely worried is
the physical health of their loved ones. So, the main transition towards
considering Life Insurance cover of utmost importance is due to the impact of
COVID-19 and its consequences. Though this pandemic had shattered the lives of
many and ruined many businesses but what it has provided is a bigger
opportunity for the Insurance Industry to take a paradigm shift. It has changed
the perception of Insurance and made people realize that it is as essential as
having a bread and butter.
Growth of New Business Premiums:
This is only the start of the picture; Life Insurers
saw a substantial growth of New Business Premium of about 15% to 36% for the
last quarter. Insurance being a class of business that rely on physical
interaction, the transition of selling Life Insurance online was not that easy
but the digital media played its part. It helped the industry to bounce back on
track, not only did it helped selling Insurance but has also managed to
increase the awareness of Insurance among consumers.
These numbers at the initial stage of the pandemic were
not stable and was declining drastically but post that it showed a sharp
contrast. Quarter 1 of the Fiscal Year 2021 was not very happening for the Life
Insurance sector and other line of business as well, the Life sector New
Business Premium had been plummeted to more than 18% due to the pandemic.
During the initial six to seven months of the pandemic the sector bagged a
marginal 3.13% increase in the NBP from 1.43 trillion to 1.47 trillion. Hence,
the figures for the NBP shows the level of concern of people about their family
in terms of financial aid and how an “unnecessary expense can change into a
necessity”.
There was a survey conducted by “Policybazaar.com” to
figure out the customer sentiment towards household financing, financial
planning and buying insurance during the pandemic era. The results were
astonishing that unlike the past, Life Insurance has now become a subject that
has made its ground in the minds of every individual. It is a product that the
customers are willing to buy without the need of any big sales push.
It specifies, how a pandemic can change the picture of
individual preferences in terms of financial planning as well as the standard
of living. Points to ponder on is that, now individual are inclined more
towards buying a term life insurance as well as a health cover to insure self
and their loved ones. Life and Health cover are now becoming a foundation of
personal financial planning in times of the pandemic. Despite of the fact that
Insurance penetration being low in India, the pandemic has certainly accelerated
awareness about Insurance and its importance to the general public.
Based on the traffic closed to about “15000” captured by “Policybazaar.com”, more than 50% of the consumers considered Life Insurance very important to keep their finances ticking, 29% of the consumers considered it to be a good option to have as a companion of financial planning. About 20% were not very sure or considered it to be not important. So, the question arises what can be done to penetrate the market of 20% people who don’t consider Life Insurance an important financial planning tool? There can be many factors associated with this context:
- Premium to be very high as per the earning capacity of an individual
- “Bad experience” from word of mouth
- Shift of physical business to an online platform
- Not many options of Life Insurance available for lower section of the society
- Income stability
With these problems at its place, the
IRDAI has asked the Life Insurance companies to launch a standardise term
insurance plan named “SARAL JEEVAN BIMA” effective January 1st 2021.
The plan offers customer a sum assure that range from 5lakhs to 25lakhs at a
much lower premium rate. It is a type of Non-Linked non-participating pure risk
premium life insurance plan which provides the nominees of the assured a lump
sum amount in the event of unforeseen death of the life assured. So, the main
objective to launch this policy is to help customers take informed decisions as
there are several number of term insurance plans which makes it difficult for
the customers to choose.
Now over a decade, the global industry had grown at a CAGR of 2% while the Indian Insurance market grew at a CAGR of close to 12%, which is almost 6 times the growth. The impact of COVID-19 has influenced all forms of business, but Life Insurance companies had suffered on mainly two accounts:
- Loss of Sales
- Outgo in terms of Claim Settlement
From the chart we can see the transition of Indian Life Insurance premium that has reached over 500 lakh Crores in FY19 from 150 Lakh Crores in FY07. The reason for the growth of CAGR close to about 12% is:
- Rising Household saving income level
- Increasing Education
- Rise of the middle-class tax benefits
- Product Innovations
- Effective leverage of multiple distribution channels
From the above given figure, we can
witness the drastic growth of premiums acquired in the FY20 as compared to what
was achieved in FY19. Also, when we try to compare the year-to-date figures, we
can see in the month of Nov there is a substantial increase over the last year.
The question arises, what made this drive to achieve such good numbers in a
span of few months? The main pillar to this success of making people aware
about Life Insurance and their importance were the inclusion of digital media
and digital distribution channels.
The industry had earlier witnessed
digital focused distribution channel such as online players, IMFs etc. that
fetched them a good amount of business. These operations are hassle free and
makes the process time saving for individuals. The pandemic has caused the
insurance companies to fast tract the digital operation process for online
sales and drive customer satisfaction. For e.g., LIC has launched ANANDA
platform for the individual agents to forecast the business proceeds online.
So, what we can conclude from the
article is that, people are starting to feel the importance of having a life
insurance cover and the demand of protection plans, because of the implication
of the ongoing pandemic. Term plans are doing great in the Life Insurance space
as they provide the consumers a lump-sum amount in the event of unforeseen
death with a minimal premium rate. So, before I end this article, if you are
not having a Life Insurance coverage till now make sure to have one because
“Life Insurance is not for those who passes, but for those who survives”
References:
IRDAI asks life insurers to launch 'Saral Jeevan Bima' scheme by Jan 1 | Zee Business (zeebiz.com)