In India, we lost almost 4 lakh lives due to COVID-19. While the loss to each of the bereaved families is incalculable, the impact of such death claims pay-out to insurance companies is less than 1 percent because the other 99 percent, who are still living, have paid their premiums.
Life insurance penetration in India is less than 4 percent, implying that families of only 16,000 out of 4 lakh lives may have been compensated for the financial loss by insurance companies during this pandemic.
Insurance is a Risk Mitigation Tool: Both life and general insurance covers serve as a risk mitigation tool for any unforeseen events, which could lead to financial loss to the family. Unfortunately, the fundamental concept is commonly misunderstood as a tax saving investment tool as against an effective risk-mitigation solution, which also offers tax rebates.
Pandemic as the trigger: The key reason for one of the lowest life insurance penetrations in our country is directly related to low awareness of the underlying value of life insurance solutions. We are receptive to insuring assets like cars and homes while overlooking the imperative of a life insurance policy for self or for the breadwinner in the family. In a way, the pandemic has increased awareness manifold in endorsing the need for owning insurance solutions among families across the country.
It may be worthwhile to treat life insurance cover as mandatory for every earning individual to compensate the family in case of any untoward incident.
The government, in its endeavor to spread awareess and to reach the underpenetrated sections of the population in rural areas, has executed schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Fasal Bima Yojana and Ayushman Bharat Pradhan Mantri Jan Aarogya Yojana. While these are progressive measures undertaken, the challenge still remains in educating the masses about the objective of insurance.
The State of Denial: The single biggest reason for low awareness regarding life insurance in our country emanates from denial. Just because we have not witnessed a specific event does not mean it cannot happen. The pandemic serves as a testament to this theory and helps us realize the power and importance of owning an insurance policy. The disproportionate impact of this rare event has left many families on the streets, which may have been avoided or mitigated by an adequate life insurance and health cover in place.
Pandemic and Technology as Catalysts to Adoption: It is imperative for us to understand the importance of life and health insurance in financial planning amid growing uncertainties in income and medical costs.
The exponential increase in awareness as an outcome of the pandemic has helped augment the insurance penetration in our country with a significant shift towards the demand for pure protection solutions.
Alongside, technological innovations where the entire customer journey is contact-less, has removed the barriers to adoption, making the ownership of insurance policies seamless and convenient.
Protect and Secure: Unlike the mandatory Pan and Aadhar registration for all citizens, the absence of any systematic engagement process, which facilitates purchase of life insurance solutions at an appropriate time and age, it is incumbent on each of us and all institutions to spread awareness. For the breadwinner, the need to protect and secure the hopes and dreams of loved ones form the core of a more sustainable future with or without physical presence. By doing so, you would be well prepared to weather any rare events, which are beyond the realm of normal expectations, such as Covid-19. Get yourself protected today!
Mr. Sunanda Roy is the Country Head – IndiaFirst Life Insurance Company Ltd for Bank of Baroda
