Should you opt for tailor-made products?

The outlook towards insurance and its utility have changed in the past couple of years. Millennials, aged 18-35 years, view insurance differently. Not that their financial vulnerabilities have suddenly changed, it is just that they realise the kind and extent of cover they need. This explains the growing clamour of insurance companies to launch “micro-insurance” policies.

“Bite-sized” products as per your need

Take, for example, the recent launch of “bite-sized” products by Aegon Life Insurance and ICICI Prudential Life Insurance. Both the companies launched their respective micro-term plans in a recent collaboration with MobiKwik in May 2019. Harish Kurudi, head - product development and management, Aegon Life Insurance, explains, “With growing awareness among consumers in the recent years, bite-sized term insurance plans have gained a lot of popularity, opening up a highly underpenetrated segment in the Indian market. To beat the competition and occupy the maximum share of this pie, life insurance companies have innovated in this space and produced complex benefit packed propositions, with an aim to launch the best term insurance plan in the market. This, in turn, has transformed term insurance from a simple financial risk mitigating tool to non-customer centric complicated products.”

However, long before these big insurance companies realised the need to sell customised “bite-sized” products, Toffee Insurance, an Indian start-up, sought to relieve its customers from the burden of paying for less flexible, more traditional insurance plans. Rohan Kumar, CEO, Toffee Insurance, says, “Millennials are early adopters to a wide range of services including new financial products. Bite-sized, contextualised insurance policies make sense to them because of the relevance and introduce financial planning without neglecting their income and lifestyle requirements.”

Types of micro-insurance plans

Micro-insurance serves to benefit both the low-income strata people and the millennial population based on their needs. Depending on the purpose they serve, these small-sized insurance products may be classified as:

Need-based health coverage: A family health plan that covers the entire family and takes care of the hospitalisation expenses and other medical costs may not be useful for a young man or woman who lives alone, far from his family, in a different city. Climatic and environmental conditions may largely differ, thus, mandating the need for a specific kind of health cover. Shreeraj Deshpande, principal officer and CEO (officiating), Future Generali General Insurance, says, “Small ticket-size health insurance products do help in need-based health covers which may be specific or short duration insurance. There are health insurance policies which also cover specific illnesses like dengue and malaria caused by vectors. We have a Future Vector Care product to cover vector-borne diseases on benefit basis.”

Specifically event-based cover: What if a person plans to go on a short business trip or yearns to spend the weekend travelling? Sensing the need to cover against specific risks at low premium rates that traditional life insurance or personal accident insurance plans fail to provide, the insurance companies are now offering domestic travel products to cover accidents even for specific travel periods. Kumar says, “Toffee Insurance sells curated products, tailored to our audience's unique needs and covers everyday risks. We have products for something as simple as daily commute and as planned as international travel.”

Short-term coverage: Buyers of car insurance and two-wheeler insurance policies have to pay for third-party insurance cover for three years and five years, respectively. However, not all vehicle owners may be driving or travelling in their vehicles all the time. For those who would like to seek insurance cover for limited periods only, insurance companies track the utilisation of the vehicle and sell micro-insurance products accordingly.

Do bite-sized plans benefit customers?

Micro-insurance plans initially came into being to ensure financial inclusion of the uninsured and economically vulnerable sections of the society. The insurance companies had launched the individual or group plans to reach out to the low-income group and those belonging to the country's most remote areas.

People in the urban and rural sector can seek protection at low costs through micro-insurance policies. “Micro-insurance is an affordable and cost-effective, non-participating and non-linked group cover for the family, generally, available without any medical examination. People in low-income groups can particularly benefit both in urban as well as rural settings as there are no exclusions. These are simplified micro plans that are easily understood by all, backed by efficient processes and ready access,” says Raj Khosla, founder and managing director, MyMoneyMantra.com.

However, insurance as an essential financial investment is yet to gain a strong foothold in the minds of today's millennials. Kurudi says, “Bite-sized plans are simplistic, relevant and affordable for the masses. The bite-size approach is targeted towards inculcating the behaviour of purchasing insurance for the purpose of protection. The low premium sizes along with positioning impulse-based purchases are aimed to improve term plan adoption among millennials.”

Insurance companies hope that the “value for money” instinct synonymous with millennials and their focus on availing need-based coverage will ensure deeper penetration of insurance in India.