However, participants in the life insurance industry say that there has been high demand for term plans, which are pure protection product by the investors.
Indian life insurance industry has seen its first-year premiums decline by around 28% year-on-year (y-o-y) in this fiscal as business has been severely impacted by the lockdown. However, participants in the life insurance industry say that there has been high demand for term plans, which are pure protection product by the investors.
Insurers believe that there would be demand of term plans going forward as investors have realised importance of having a basic insurance cover rather than investing in endowments plans. Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance Company, says that one of the reasons why there is an increased traction towards term plans is fear caused by Covid-19.
“In the past, many people in India bought life cover with a wrap around savings element. But given the current downturn in the economic situation, more and more people are opting for a basic life insurance cover,” said Gandhi. At IndiaFirst Life, the number of protection policies sold in April and May last year was just 2%, which has now surged to over 40% of total numbers of policies sold. With a rise in the number of term policies, premiums from protection has also breached the 10% mark this year.
The data from Insurance Regulatory and Development Authority of India (Irdai) shows that first year premium for life insurance industry stood at Rs 20,466.76 crore in this financial year compared to Rs 28,395.90 crore in same period last year. In May first year premiums were down by 25% y-o-y.
Market players also believe that not only retail individuals but even group term plan will see demand in this financial year. The premium of term plans has seen increase of around 20-30% in the last few months as reinsurers have increased the prices on term plans. Term insurance products are protection products which are the most simple where the insured gets a fixed amount on death only. But on maturity if policyholder is alive then no benefits are given.
Kamlesh Rao, MD & CEO, Aditya Birla Sun Life Insurance, says, “Term plan business for entire industry and for our company has gone up last year. The trends in last three months are also inching up. Even with increase in premiums we have seen demand of term plans. Going forward when the lockdown eases, I think life insurance industry will see surge in opportunities in protection business.”