By Akshay Dhand, Appointed Actuary & Director – Products, Canara HSBC OBC Life Insurance
We are living in unprecedented times at the moment with the world community in the grip of the Covid-19 pandemic. While we are calling it the “new normal”, many of us have never encountered this kind of situation in our lifetimes and it has thrown a host of challenges to governments and communities around the world from medical to economic to social issues. While a number of industries are badly affected and halted, the pandemic has given a new set of opportunities for some of the other industries, one of them being life and health insurance.
Historically, the awareness of insurance products and the need for insurance has been low in India not necessarily because of less or no insurance products on offer but majorly because most of Indian market still remains under penetrated. While the same has shown some improvement in recent times, thanks to efforts of insurance companies, industry bodies, insurance intermediaries and the regulator, it is still restricted to the bigger cities and the awareness of insurance in smaller cities and towns still needs significant improvement.
To that extent, the ongoing pandemic is certainly expected to boost the awareness about insurance across the country as people realise the importance of protecting the financial status of the family should something unfortunate were to occur to the bread winners. Similarly, the need to cover the hospitalization expenses associated with Covid-19 is also likely to boost the customers’ need for fixed benefit health insurance products as well as mediclaim insurance products. Given the extent of the pandemic and its widespread reach across the country, the consequent awareness is also expected not only to remain in the metros but also reach out to Tier 2 and 3 cities. As far as the response from the industry is concerned, General and Health insurance companies have also been quick to respond to the emerging need by launching Covid-19 specific products in the market that provide cover for diagnosis and hospitalization.
Similarly, life insurance companies have stepped up the efforts to educate consumers on the fact that all their life insurance products cover death due to all reasons including Covid-19. This has further enhanced customer’s attention towards the benefits of insurance and the importance of being adequately covered. The Regulator has also supported by relaxing norms for both the insurance companies & the customers as well as encouraging companies to come up with specific products to help
prospective customers by providing protection against Covid-19.
While the overall sales of insurance products may be down from previous year but the same is more due to the restriction in movement and business imposed by authorities in various parts of the country to varying extent. As these restrictions are eased, we expect to see the surge in the awareness of insurance products to translate to significant growth of the insurance market. Another market phenomenon which seems to be unfolding this year is the increase in the premiums of online protection products across the life insurance industry.
However, that has little to do with the current pandemic and is more because the overall mortality experience of these plans have worsened over the years as the customer base for such plans becomes wider versus what was originally thought to be restricted to internet savvy more aware metro customers. In my opinion, this can actually be viewed as a positive development for the life insurance industry as it shows increasing penetration of insurance products not only in the bigger cities but also in the Tier 2 and 3 cities. Despite this increase in premiums, the queries from prospective customers are on the rise and we are already witnessing an increase in the online sales of protection products.
The pandemic is also likely to change the product preference from consumers as they look more towards protection oriented products rather than savings oriented products, which have been the typical preference of consumers till date, as the importance of providing for the financial health of the family takes centre stage in people’s financial planning. Within the savings products also, the preference is expected to tilt towards traditional products offering guaranteed returns rather than unit-linked products as customers look for safer investments in these uncertain times.
Overall, it is important that insurance companies, industry bodies, insurance intermediaries and the regulator effectively educate and enhance the understanding of the consumers not only from the metro areas but also from the smaller towns and cities about the importance of insurance and how it can be of great support in the uncertainties that life can throw at them such as the ongoing pandemic. This will benefit both the insurance industry and the consumers in the long run. Insurance is a key financial instrument and is extremely important for individuals to include it in their financial portfolios so as to avoid potentially significant adverse outcomes for them and their families in case of unfortunate events.