Before anyone can have a meaningful dialogue on increasing insurance penetration, it is crucial that there is a correct understanding of what insurance products are all about, what purpose they serve and why have them at all in the first place. In her address at the just concluded FE Modern BFSI Summit 2023 in Mumbai, R M Vishakha, MD & CEO of IndiaFirst Life Insurance Company, touched upon these and more while laying out a case for building greater awareness about insurance.
She began by saying that we still have a long way to go in educating people on insurance and the benefits that can come with it. While most people have covered some distance in this and moved from near total ignorance to appreciation of a term insurance as perhaps a need, she explained, “all of us tend to look at insurance as a risk management product” and may be fine looking at a term insurance product but still not sure about say an endowment plan or ULIPs (Unit Linked Insurance Plan). She reminded that a term plan covered only one aspect of risk, which was around mortality or the risk of someone dying too early. But in times when people tend to live longer, the options were clear: Either one had enough money to sustain a long life or one needed to make money work for the person in question. To the audience that had many CXOs, she said, “many of us in our official capacity have, as part of our job, dealt with ALM (asset liability management) for the company but how many of us apply the same ALM to our personal lives?” ALM, she said, was as important for an individual as it would be for a company and life insurance plans work towards that because life insurance plans are the only long-term guaranteed plans available in the country of even in the world. “If you take an annuity product from life insurance company, how many of you are aware that a life insurance contract cannot be cancelled?,” she asked and explained: “a mutual fund product can be cancelled or shifted to another fund or the product holder asked to take the money back.” Therefore, “when comparisons are made between life insurance returns, fixed deposit returns or mutual fund returns, it is not even a case of apples versus oranges because this is like comparing different categories all together.”
Life insurance products, Vishakha further explained typically covered mortality, morbidity, longevity and also financial risks with no product that has market volatility. Therefore, for people with a low risk appetite or those with only their retirement income to live off from for the next 25 to 30 years, life insurance products were the only ones that were not volatile and were not market-linked. “I genuinely believe that even among intelligent, educated people there is lack of understanding of the nuances of the product and to thereby be the goodwill ambassadors of the product, especially for those with a low risk appetite.”