Demand for savings insurance plans witness a dip due to fall in income
In these difficult times, people have postponed their decision to invest in a savings insurance plan mostly due to liquidity issues
With the uncertainty of income looming amid the second wave of Covid-19, the demand for investment plans from life insurance plans has seen a dip. Experts say many people have postponed their decisions to invest in savings insurance plans due to various reasons, including the need for liquidity money to cover unforeseen expenses such as job loss and hospitalisation.
Anuj Mathur, MD and CEO, Canara HSBC OBC Life Insurance, said, “The pull has been actually towards term insurance but that too selectively. We have not seen too much increase in the savings business, which I think over the period of time will increase. Also, because of Covid, there is uncertainty in the income of people, broadly among business owners and SMEs, as their disposable income has got impacted which has resulted in slightly lower demand for savings through investment plans.”
The pandemic, especially the second wave, has spread a lot of uncertainty and fear amongst people. However, with receding cases, India’s unemployment rate fell to 8.7% in the week ended June 13 from 14.7% in May, according to the latest numbers shared by the Centre for Monitoring Indian Economy (CMIE).
“In these difficult times, we see some customers have postponed their decision to invest in a savings insurance plan for a couple of months due to various reasons like the need for liquid money to cover for unforeseen medical/other expenses, loss of job/pay-cut, etc. For customers who do not have life coverage, term insurance has definitely become their preference. Irrespective of all the above, sales of investment insurance products are generally lower in Q1 and pick up gradually during the year as we approach the end of the financial year and enter the tax-saving season,” said Ankit Agrawal, CEO & co-founder, InsuranceDekho.
Term Insurance
While people have put on hold their plans to buy savings plans, there has been a substantial jump in online term plans. Naval Goel, Founder & CEO, PolicyX.com said, “Certainly there has been a significant jump in the demand for the term insurance plans in the financial year 2020-21. PolicyX.com has seen a growth of around 29% in terms of the policies issued & around 30% growth in terms of organic lead in 2020-21. There is a fair reason behind this demand trend as people have become doubly cautious about their lives and their families future and want to ensure their families are secured in case of an unfortunate event. Despite the increase in the premium for term insurance plans, the demand has seen an uptick because of the severity of the situation.”
Agrawal agrees, “Yes, we have seen an increase in the sale of term plans. Term insurance purchases increased by 70% in May compared to March on InsuranceDekho’s website. Starting with the second pandemic, insurance has now become the fourth pillar for a middle-class family, after clothing, food, and a home.”
However, the jump has not been seen across the country, it is selective and mostly for online plans. “Insurance awareness has gone up. Over the last 15 months, we have seen an increase in desire from the customer’s side to buy life insurance. Term Insurance is limited to a small percentage of the population. Primarily, people who are tech-savvy who are able to go to web aggregators website and look for online plans they are the ones buying term insurance plans.” said Mathur.