Saral Jeevan Bima will play a major role in expanding the term insurance market in India and increase insurance penetration rate in a relatively new and larger customer segment.
The term life insurance business in India is soon expected to heat up, with insurers all set to rollout the standard term insurance policy Saral Jeevan Bima from January 1st 2021. In the month of October, the Insurance Regulatory and Development Authority of India (IRDAI) directed all life insurers to launch the standard term plan for policy buyers from Jan 1st 2021 onwards. The plan has uniform terms and conditions across all insurers with sum assured ranging between Rs 5 lakh and Rs 25 lakh.
Since the onset of the COVID-19 pandemic, insurers have been witnessing an exciting trend. The demand for term insurance in the last 9 months has increased significantly with a record 60 – 70 per cent increase in online search for term life insurance. Many insurers have experienced a growth of 35 – 40 per cent in their term life insurance business. The fear of COVID-19, especially amongst individuals with financial dependents, has resulted in more demand for term plans.
However, a few consumers bought term plans with inadequate cover which may not be sufficient to meet the financial needs of their loved ones in case of any unfortunate event. To cater to this issue, Saral Jeevan Bima can be a reliable solution to enhance the existing cover and avail coverage for an adequate sum assured.
Need for Standard Term Insurance Product
The rise in demand for term cover during the pandemic has shifted the focus of consumers towards financial protection and this is when the regulator felt the need for a standard term life cover that can benefit all. With the interest of people in term plans for pure protection increasing each passing day, having a product that is easy to understand and buy is the need of the hour. Though term insurance has been in the Indian life insurance market for quite some time now, the primary target audience has remained the same.
Term plans mostly focus on targeting high salaried individuals, postgraduates and graduates, self-employed with high net value, and people residing in tier 1 and 2 cities. Due to this, term life insurance was out of the reach of people who may need a term cover the most i.e. the lower-income group section of the society. India is currently home to 10 crore such families where there is a single breadwinner in the family who takes care of the daily expenses and other financial needs of 4 – 5 others.
Under such circumstances, it is very important to cover the life of the breadwinner with term insurance of adequate sum assured. While buying regular term insurance, people belonging to the lower-income group usually face a plethora of restriction such as inadequate academic qualification, irregular income proofs and various other factors.
A major reason why most people in India do not invest in term plans is lack of regular income proofs – the top most eligibility criteria for buying a term life insurance plan. As per a report by the Central Board of Direct Taxes, of India’s 1.35 billion population, only 6 crore people file for income tax returns each year. This means, only 6 crore people in India have regular income proofs and qualify for buying a term life insurance plan. To cater to all these challenges and to provide adequate protection to people with lack of such resources, Saral Jeevan Bima is here to the rescue. Since there are no restrictions attached in terms of education, location, income proof, etc. to buy this standard product, a vast population of over 50 crore – the lower-income group – will have access to term insurance.
To make the product within the reach of the target customers, Saral Jeevan Bima will be priced as per the extent of risk it covers. Customers can avail a discount of up to 20 per cent on the premiums when buying the plan online. Keeping in mind the earning and spending capacity of people falling under the lower-income group, the customers will have the option of buying the plan in easy monthly instalments without having to pay the entire premium as a lump sum.
Saral Jeevan Bima will play a major role in expanding the term insurance market in India and increase insurance penetration rate in a relatively new and larger customer segment. IRDAI has always emphasised on the need for offering simple products and using simple language in the policy documents to bring maximum people under the insurance umbrella. The regulator has underlined that Sara Jeevan Bima will make it easier for customers seeking term life insurance to make an informed choice. The standard product is expected to play an integral role in enhancing the trust between insurers and customers while reducing mis-selling and potential disputes that often come during a claim settlement.
(The author is CBO-Life Insurance, Policybazaar.com)