For a sector that the majority of Indians entrust their savings with, life insurance is easily an important indicator of India’s financial health. And true to this, the prevailing weak economic landscape has had an impact on the life insurance industry in India, as the overall intent to purchase polices has taken a hit. But despite the weak rupee, inflation and general concern over key financial indicators, Nielsen’s findings showed that life insurance penetration in India is up by 3 percent in 2013 to touch 66 percent.
Indian consumers are looking to diversify their portfolio, and there have been significant surges in fixed return investments and equity investments. While life insurance has the highest penetration among financial products, the fixed return and equity investment categories have experienced more impressive growth this year.
The average Indian consumer is getting younger each day and his wallet is getting fatter. More disposable income in the hands of the youth has directly affected their policy purchase decisions. Consumers aged 22-30 showed a higher intent for purchase of life insurance products (18%) than the 31-40 age group (16%). However, barriers for this category include the long-term nature of the investment, the low rate of returns and the challenge of getting money back when the investment matures.
A smaller ticket size and single premium options for insurance coverage may be appealing to the young Indian market. This generation of prospective buyers is likely to appreciate policies that are flexible in terms of withdrawal and allow them to fulfill their short-term goals.
The average Indians in the B and C socio-economic categories (SEC B and C), prioritize security, are conservative and yearn for a better lifestyle. SEC grades in India range from A1 to E3 and are based on occupation and education. A1 is the uppermost socio-economic class and E2, the lowest.
While life insurance covers security, it also promises a better lifestyle in the long run. Growing awareness and increasing salaries have resulted in a significant 1.8 times rise in the average annual premiums paid in 2013 as compared with 2010. However, the proportion of life coverage in comparison to annual income has come down.
There is a far higher awareness of financial products among women today, whether for investment purposes, or for securing their or their children’s future—and this leads to an active role in the financial decision-making process within the family. The incidence of women investing in insurance surged by six percent to touch 59 percent in 2013.
Nearly half (49%) of the female respondents cited their children’s future as the main reason for investing in life insurance, and 44 percent indicated that life insurance was important in case of untimely death. This shows how important it is for marketers and advertisers of life insurance products to actively involve and engage women in their communication.
When it came to awareness of financial products, women were found to be at par with men, but a significant percentage of the women were still dependent on their spouses when it came to policy purchase decisions. The study also found that the intention to purchase insurance was higher among women in the metros, which makes the metro working woman a category to look out for.
A major transformation in the life insurance industry in India is the slow but steady decentralization of dominance. Although the Life Insurance Corp. of India (LIC) still dominates the life insurance market, private insurers are also getting a decent share of the pie. Compared with a paltry 6 percent in 2010, 16 percent of the respondents in the Nielsen study purchased their first policy from private insurers in 2013.
The majority of these buyers belong to the SEC A category, whose monthly earning is more than Rs 50,000, and the 22 to 30 age group, who are willing and capable of experimenting. For private insurers, this is an incredible opportunity to educate prospective buyers about their products. The internet has facilitated this communication with more people searching for information and researching financial products online than ever before.
With new entrants and private players in the mix, the insurance landscape in India is expected to become more dynamic. In order to attract more women and the youth, the offerings by these players as well as the older ones will become more diversified and flexible. But since life insurance already has a strong penetration, the trick to stand out would be to align marketing strategies to involve these high potential consumer categories and make them feel involved in the insurance policy decisions of the household.
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