Indians rush to take cover as COVID-19 sparks fears of death, fate of dependent kin

Every second person in 34-year-old Pranav Sule’s family is a financial advisor or into insurance sales. Sule has made a few investments in the stock market but always regarded buying a term plan as a waste of money. However, he seems to have changed his mind over the last few weeks.

“Three people in my friends and family circle tested positive for Coronavirus (COVID-19) and their biggest worry was what would happen to the family financially. I have my wife who is a home-maker and two young children. Considering COVID-19 could linger for long, I have decided to buy a Rs 50 lakh term cover so that my dependants have no financial liability in my absence,” he said.

Amidst the COVID-19 outbreak and reports of several casualties in the country, Indians seem to be worried about death and the financial consequence of that on their family members.

Life insurers told Moneycontrol that there has been a surge in queries for term insurance or protection plans from mid-March 2020 onwards. This has resulted in a 25-30 percent in the sales of term insurance products for insurers especially from April 2020 onwards.

Pure term plans offer a life insurance cover on payment of an annual premium. Here the claim is payable only if the policyholder dies during the tenure of the cover. If he/she survives, no payment is made.

Also read: Live updates from COVID-19 in India

Rahul Agarwal, Chief Distribution Officer, Exide Life Insurance said people are generally scared by the crisis.

“However, it has resulted in higher awareness levels towards insuring oneself to be prepared in the times of uncertainties like these. As a company, we have witnessed a substantial increase in sales of term plans last month. We registered 100 percent growth in protection plans in April 2020 over April 2019,” he said.

Agarwal said the sales of term plans have been channel agnostic because the company follows a ‘mobile-first’ approach.

According to data from the Insurance Regulatory and Development Authority of India (IRDAI), first-year premium collections declined 32.6 percent year-on-year (YoY) to Rs 6,727.74 crore in April 2020. However, insurers told Moneycontrol it is term plans that are holding up growth.

Tata AIA Life which was among the handful of insurers to register a growth in new premiums in April 2020 saw a similar trend. New premiums for Tata AIA Life grew 26.32 percent year-on-year to Rs 154.36 crore in April 2020.

“Term insurance offers the much-needed security that families look for to protect the future of their loved ones. This is especially true at uncertain times like these.  As a result, April 2020 new business numbers show a surge in the purchase of term/protection insurance,” said Rishi Srivastava, Managing Director & Chief Executive Officer of Tata AIA Life Insurance.

He said Tata AIA's overall growth of 38 percent for the month of April, is largely due to protection business contribution. The company has seen an 80 percent growth in purchase of term in the month over last year.

As far as term plans are concerned, there is a thrust on having some medical examinations for a certain type of covers. This is to ensure pre-existing ailments are captured and also fraud is minimised.

At Tata AIA, Srivastava said the company has high non-medical limits which ensure maximum customers don’t need to go for physical medical examination. Medical tests, if any required, are being co-ordinated via telephonic and video calls.

“Where required we arrange medicals at home or at a diagnostic centre after taking all precautions, and with consumer consent,” added Srivastava.

COVID-19 has affected 4.4 million people across the world and caused 302,000 deaths. In India, there have been 81,790 reported positive cases and 2,649 deaths so far.

Bharat Kalsi, chief financial officer, Bajaj Allianz Life Insurance said customers are witnessing how COVID-19 is impacting lives across the world and have started enquiring and purchasing term plans in India as well.

With the regulator making e-KYC possible, along with digital medical underwriting and medical tests being conducted via video calls, purchasing a term plan has become easier for customers in this lockdown.

Since March 25, a nationwide lockdown was announced by Prime Minister Narendra Modi to minimise the spread of COVID-19. For life insurance policy sales that are primarily done through agents and bank branches, there was an impact on policy distribution.

Among life insurance policies, term plans have been widely sold through online platforms. Hence, for this product segment, it was easier for insurers to shift processes online.

Casparus Kromhout, MD & CEO, Shriram Life Insurance said in FY20, about 40 percent of the new business policies were issued under term plans with a portion of it under Term with Return of Premium (TROP).

“Since the lockdown, the number of enquiries about term plans and premium quotations have further increased significantly. We see that there is a wide rise in awareness on risk in our market segment – Tier II, III and rural market,” he added.

For policyholders, digital sales of term plans without any intermediary would mean that policy premiums could also come down. In the first-year premium, about 20-35 percent of the amount goes into paying commissions for the intermediary, be it agent or bank. If the policy is directly brought from the website this cost is taken out.

Overall, the premiums of term plans have also been increased by 15-20 percent due to a rise in reinsurance costs. Despite this, life insurers said policyholders are willing to invest in a product.

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