In a year, 77% of insured will take a bigger cover

As much as 85% of the middle income earners in the country feel the need to better protect their lifestyles through life insurance, while 77% of those who already have a cover intend to buy a bigger one in a year’s time, according to the ING Investor Dashboard Survey.

Indeed, the intention to buy additional insurance in the next 12 months is the highest for Indian customers compared with other Asia-Pacific countries, says the survey.

“With rising disposable income, many individuals want their lifestyles to be protected. Insurance policies with savings plans are proving to be the product that meets this demand,” says Frank Koster, CEO ING Insurance Asia Pacific.

According to the report, Indians attach the highest importance to protection of family income, children’s education and saving for retirement, in that order. That perhaps justifies the emphasis on conventional products as against unit linked insurance plans, or Ulips.

RR dash, zonal manager of Life Insurance Corporation, appears to concur. “People prefer conventional products like endowment, which generate decent returns. This year, we saw an increase of 40% in these products and will continue to see a rise in them vis-a-vis Ulips. Unless the markets show potential, it’s going to be difficult for the Ulips to perform and grow.”

The conventional products include pure protection (term) plans, money-back policies and endowment plans. “If a person is looking at purchasing additional insurance with a view to increase his cover, it’s best to go for a term plan, which has now become affordable with online purchase. We expect a good a market for insurance products in the near future,” says M N Rao, managing director & CEO of SBI Life insurance,

As per the Life Insurance Council of India, insurance penetration (by total premium collected) is only 4% of the country’s gross domestic product.

The distribution is predictably skewed in favour of the urban areas, where the penetration level stands at 65%, according to a recent report by McKinsey & Co.

As per a policybazaar.com estimate, the total online sales figure for life insurance this fiscal is 270,000 policies compared with 150,000 in the last. Sale of non-term plans is going to touch 30% this fiscal compared with 25% in FY11, says the website.
“Sale of term plans has also seen significant growth. In the last two years, people opting for a term cover have more than doubled to 50 lakh. Next year, we expect the opted cover to be up by at least 36%,” says Akshay Mehrotra, chief marketing officer, Policybazaar.com.

Given the choppiness in the equity markets, some experts believe it is advisable to go for insurance products with savings options such as endowment and money-back as against Ulips.

“At this point in time, people must avoid Ulips as, factoring in the charges, the returns they generate are not good enough,” says the research head of a reputed brokerage firm.

But P Nandagopal, managing director and CEO of IndiaFirst Life Insurance begs to differ. “This may be the right time to invest in Ulip, taking into consideration one’s risk appetite. Since the markets are at a low, a person can take advantage of being invested for a long term, which is at least five years, and shift from equity to debt as time demands.”