We humans have a well-developed sense of protection when it comes to safeguarding our material belongings. In that context, life insurance becomes a must for every individual as it protects one financially. What makes life insurance unique is that it provides financial support in case of death of the policyholder. This ensures that the future plans of the family remain unaffected. A term insurance plan acts as an income replacement for the family of the life assured. Today, most individuals avail of loans—home loans, car loans, etc.—which are liabilities. In case something were to happen to the individual, the family is burdened with the responsibility of repaying the loan, which could pose a challenge in the absence of a regular source of income.
Changing mindsets: increasing protection levels
The numbers are encouraging when one sees those who are opting for various types of insurances
The sum assured to GDP ratio is an indication of the quantum of financial protection purchased. This ratio is higher for most mature markets, for example, USA: 270 per cent; Japan: 260 per cent; Singapore: 226 per cent; South Korea: 166 per cent; Malaysia: 149 per cent; and Germany: 106 per cent. Regulatory emphasis on the need for life cover has facilitated a growth in the country’s sum assured to GDP ratio from 55.8 per cent in FY11 to 62.8 per cent in FY15. While India has a long way to go vis-à-vis other developed markets, the future holds a lot of promise.
The growing aspirations of the country’s population and changing lifestyles have made individuals vulnerable to lifestyle-related illnesses and problems, which too can impact finances adversely. The growing trend of nuclear families makes it necessary to have a financial support system in place, that can help a family in case of an unforeseen emergency.
The working population is realising the importance of financial protection to ensure that their families can continue with the financial plan in the absence of the earning member or in case the earning member were to be diagnosed with any critical illness. Typically, customers purchased separate products to cover themselves against death, health and accident. Due to the burgeoning customer need to protect self and family, life insurance companies have been innovating in the product space to offer comprehensive cover against death, disease and disability, through a single product. Add to this the flexibility offered to customers to choose the premium payment mode—Single, Limited or Regular payments.
The availability of products, which offer comprehensive protection for both life and health, has made it easier for customers to address multiple needs without having to hunt for different options, covering various needs. With a comprehensive cover offered by innovative term plans, customers have been gravitating towards products rich in features, and addressing all their protection needs.
Technology has been constantly altering the dynamics of the life insurance industry, enabling customers to quantify their financial goals and obligations and empowering them to make informed buying decisions. Once the product is selected, it can be purchased online, with minimal documentation. In most cases, the entire process can be concluded in a matter of minutes.
Smooth on-boarding is an important element in product purchase, which goes a long way in attracting customers. Claims settlement ratio can be a decider, when it comes to choosing a life insurer. Life insurance companies endeavour to settle genuine claims in the least possible time frame. Life insurance companies have innovated in claims pay-out too, as nominees have the option to receive the claim proceeds either in lumpsum or as monthly income, over a period of time. This can provide the family with the required time to plan their future steps, to ensure financial stability.
The consumer attitude towards life insurance as a tool to provide protection across the board is gaining traction and this holds the key to increasing the levels of protection in the country.
Puneet Nanda Executive Director, ICICI Prudential Life Insurance
The writer’s views are personal and do not represent those of the company