Covid-19 has affected lives across the globe and everyone has witnessed the restructuring of the economic order. With the pandemic came financial anxiety, which also led to a significant spike in customers’ interest in buying life insurance in unprecedented times.
Earlier insurance was considered as an ‘investment’ or ‘tax-saving’ instrument, but the pandemic has made a notable shift in terms of awareness and benefits associated with life insurance. Since the start of COVID-19, the Indian consumer’s perspective has shifted significantly towards physical and financial preparedness. They are becoming more aware of their health and finances as a result of their experience with the pandemic.
The life insurance penetration in the country has improved to 3.2% in 2020 from 2.8% in 2019. But it still remains low when compared to the other countries. While the reason behind the low insurance penetration could be plenty, the most common reasons have been treating insurance as a tax-saving instrument or not understanding the importance of insurance.
Post the outbreak of pandemic, there has been an increased awareness towards life insurance and its role in our lives. This stands true as 78% of Indians feel that insurance is extremely important in the overall financial planning process, reveals SBI Life’s Financial Immunity Survey 2.0. . Realizing this importance of life insurance, 46% and 44% bought health and life insurance respectively for the first time after the March 2020 outbreak.
The survey further reveals that 57% of Indians feel ‘Financial Immunity‘ is equal to ‘Being financially secure and stable”. This shows that being financially immune is gaining prominence amidst the uncertainty introduced by the pandemic.
Further, the top three worries of Indians include:
- Rising medical/ treatment cost (59%)
- Instability of jobs (59%)
- Concerns around the health of self/ family members (58%)
Financial anxiety has become prevalent in these times and as a result, the pandemic has motivated customers to explore options and choose suitable life insurance plans. Despite these uncertainties, the pandemic has increased public awareness of the value and importance of life insurance.
Another important insight that the survey reveals is that 79% of Indians have faced income reduction of which 44% of Indians income have come back to normal. 35% of the Indians are still facing income cuts. This has led to an impact for 64% of Indians on achieving their key milestones related to accumulating wealth/savings, traveling, providing for children’s education, to list a few.
Amidst the impact of income, it was also noticed that 3 out of 4 Indians have increased their savings/ investing since January 2021 and 50% of them plan to invest in savings/investments/insurance.
These figures give you even more reasons to think about securing the financial future of your loved ones by opting for life insurance, especially term plans. Consider that life insurance acts as a financial safety net for your family and loved ones, allowing them to cope financially during a tough and uncertain moment. Finally, it gives you peace of mind that your family will be financially secure in the event of a crisis.
Underinsurance can have a wide range of consequences in the long run, including financial difficulty and challenges if your pay-out is insufficient to satisfy your family’s financial demands. If you’re having financial difficulties, the people you’re responsible for, whether it’s your partner, children, or extended family, may suffer as a result.
While Indians think they are adequately insured, the ground reality is very different and worrisome. As per the survey, Indians have just 3.8 times of insurance cover of their annual income which is very low when compared to the recommended thumb rule of having at least 10X/25X times of annual income. While 70% of the Indians feel that life cover should keep on increasing when prominent life milestones are achieved, it is time that people start taking action to positively reflect the same on their financial immunity.
COVID-19 caused a significant shift in customer perceptions of life insurance as well as insurance providers’ delivery methods. It altered the way Indian businesses, especially the insurance industry, function. Even for customers, the pandemic served as a reminder of the significance of life insurance in difficult times.
In a Nutshell:
We have seen the significant role Life insurance plays in our lives. It, therefore, becomes a very important protection tool that not only helps in insuring oneself but also securing the financial future of the loved ones, which will eventually result in the construction of a strong financial immunity in the long run.