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Term policies to have a larger share than earlier, say experts

09-Nov-2020

The sales of pure term plans picked up between March and June 2020 but has now started to taper off, with fewer people buying these compared to the first quarter (April-June) of the financial year. In a term plan, policyholders pay for the life cover and don’t get back any money if they survive the term. In case of death, the insurer pays out the sum assured to the nominee or legal heirs.

Despite the tapering off, however, term plan sales continue to be higher than previous years thanks to the growing awareness among buyers, according to top executives of life insurance companies speaking at Mint Money Conversation presented by digibank by DBS that was held on 4 November.

“The perception of risk was the highest during the lockdown. People didn’t know what covid-19 was and how it could impact their families. We almost found people queuing up to buy a term plan," said Prashant Tripathy, managing director and chief executive officer, Max Life Insurance Co. Ltd.

According to the top executives of life insurance companies, their product mix will change slightly from hereon. Term plans will have a larger share than they did in the previous years even though savings products would continue to contribute to the majority of the sales of over 90%.

HIGH COVER, LOW COST

During the initial days of the pandemic, individuals rushed to buy term plans due to the fear of the virus. They were looking at a high cover at an affordable cost. Most insurers saw unprecedented demand for term plans, including Life Insurance Corp. of India (LIC), which typically sells savings products.

According to him, consumers are not only opting for a term plan but also choosing higher sums assured than they did before.

SBI Life Insurance Co. Ltd saw a similar trend. One of the life insurer’s online products that is sold through State Bank of India’s Yono platform covered 400,000 lives from April to September. “It was more than double of what we did the whole of last year," said Mahesh Kumar Sharma, MD and CEO, SBI Life Insurance Co. Ltd.

SHIFT IN MINDSET

With the government gradually lifting the lockdown, the sale of term plans has started slowing down compared to the April-June quarter, but they are still better than previous years.

“Some people may postpone the decision after this thing is through. But the demand will still be higher than the pre-covid-19 levels," he added.

As the mindset of consumers changes, the companies are also changing their business strategies of pushing pure term insurance plans and making people aware of the affordability. “We have always been pushing more of savings plans and less of term insurance. But, yes, there is a market shift. Consumers now have a better understanding of life insurance. It is also reflected in our business strategies," said Muraleedharan.

Source : Live Mint

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