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Life insurers see opportunity in plain vanilla protection plans

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Private life insurance companies are seeing an increased business opportunity in the protection (pure term) space. While savings used to be the dominant growth driver, protection products have also seen an increase in the past few quarters.

Sandeep Batra, Executive Director, ICICI Prudential Life Insurance said that while currently protection constitutes approximately 4.2 percent of their business mix, their protection annualised premium equivalent (APE) grew by 31.6 percent.

Protection constitutes pure vanilla products like pure term. Here, a customer pays a premium every year and if he/she happens to die during the policy term, the sum assured is given to the family as a lump sum death claim amount.

Senior sector officials said that while earlier there was a trend for customers to go for endowment products where the premium amount would be returned with any interest accrued if the policyholder survived the premium payment term, that is slowly changing.

“The customer always wanted to get something back at the end of the tenure which was not possible in a pure term product. However, awareness has gone up to have a higher protection cover and agents have also been forthcoming to sell such products because the regulator has enabled higher commissions for these products,” said the head of products at a mid-size private life insurer

Anilkumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance said that as on October 2017,  5 percent of the product mix is pure protection solutions, but added that the protection mix has witnessed a growth rate of 127 percent year on year in FY18.

“Our recent study on protection highlighted that people in the country are uncertain about their jobs, child’s education and living a healthy and active life, but have low preparedness in terms of protecting their needs,” said Singh.

However, he said that they are aware and hold intent to opt for protection solutions which poses an immense opportunity for life insurance companies.

Apart from the push by agents, the companies themselves are seeing a business opportunity. “First of all there is enough opportunity in selling plain vanilla protection. As we have been saying most people spend more on their car insurance than on pure life protection products. We always have our ear to the ground to pick up changes in consumer needs. Our strategy for launching new products is based on filling in need gaps in the market,” said Batra.

In endowment products, the pure protection element is lower than the one offered in pure term products. According to an earlier report by global reinsurance major Swiss Re, the mortality protection gap in India was USD 8,555 billion in 2014.