In Greek mythology, Sisyphus, the King of Corinth, cheated death twice. For that he was punished such that he had to roll a large boulder up a steep hill and the moment he reached the summit, the boulder would roll back, continuing Sisyphus’ unending struggle.
Our lives are also something similar. As we try to reach the summit of providing for all our life stage needs, the boulder of our corpus rolls down due to life risks, death or disease, inflation, investment risks or in recent times, pandemics like Coronavirus. Just as Sisyphus needed a strong wedge that could stop the boulder from rolling down, what we need is a financial wedge that stops our corpus from becoming insufficient. How can we do that?
While pure investment plans get exposed to the various risks, life insurance ensures that there is always a strong wedge to stop your financial corpus from rolling down to the bottom.
Here are some suggestions on how to create a strong financial wedge to protect our hard-earned corpus.
‘Sum Assured’ solidifying the wedge called life insurance
Sum assured is an important feature of life insurance. Whether it is term plan or traditional endowment or even retirement plan, sum assured is the minimum guaranteed sum offered to policyholders or their loved ones in case of any unfortunate event such as death or disease and in traditional endowment policies on completion of policy tenure too. Sum Assured is also relevant while buying protection solutions offered by health insurance and general insurance companies. The concept of sum assured assumes greater relevance in current times when all of us have heightened awareness about life, health, and investment risk.
Unlock potential of sum assured by moving from a land of savers to a land of protectors
While most prospective buyers are aware of life insurance, there is poor understanding of the value of life insurance and the role it plays in longer-term financial protection. As per a report that surveyed owners of life insurance to understand their major fears and insurance preferences, it was found that majority of Indians prefer savings over protection.
Out of the 70 per cent Indians who own life insurance policy, ownership of term insurance is only 28 per cent. The report also revealed how awareness and ownership of traditional savings oriented insurance policies such as endowment plans is much higher in comparison to term insurance products. Even as India continues to feel financially under-protected in the face of future uncertainties, at 30 per cent, endowment ownership is greater than term insurance ownership.
As an outcome India is significantly underinsured with life cover of just Rs 7.8 for every Rs 100 needed for protection. India’s protection gap of Rs 92.2 (i.e., 100-7.8) is highest in the Asia Pacific region. Therefore, when it comes to buying life insurance, it is important for the nation to transition from a land of savers to a land of protectors, buying adequate sum assured to shield loved ones’ future financially. With the Indian insurance industry recording a positive growth trend with year-on-year improvement in percentage of sum assured over the last five years, there are early signs of progress in that direction.
Let’s together make sum assured the ‘differentiator’
As per a recent survey by Kantar, covering 434 policyholders in 2019 (Q1), it was found that awareness of sum assured creates better stickiness for customers. Customers who understood sum assured as a concept, reflected a higher Net Promoter Score (the willingness of customers to recommend a company's products or services to others) of 40 as compared to those who didn’t comprehend it and reflected a far lower score of 25.
This indicates that customers who are able to accurately predict their family’s financial needs and decide the right sum assured, were happier and more satisfied with their life insurance plans. The industry collectively needs to work towards driving a positive narrative towards sum assured through its distribution intermediaries and marketing efforts.
Talking sum assured to the future generations
In case of millennials, a new approach to life is altering overall attitudes and path-to-purchase for life insurance products that is significantly different as compared to earlier generations. As per a Google analysis, the way millennials secure information, gather insights and make final purchasing decisions is quite peculiar. With curiosity for life insurance at all-time high which reflects in high online search for life insurance, 70 per cent millennials prefer life insurance as an investment plan.
Besides understanding their distinct behavioral aspects, the need of the hour is for life insurers to go back to basics and explore the critical question – ‘What is our Differentiator?’ and align it with the comprehensive solution that Sum Assured is. While customisable products and nimbler digital touchpoints are becoming a draw for the digital natives, in the new age of higher life and financial risks, building a solid relevance between life insurance and financial protection using the key of sum assured will be ‘the ultimate differentiator’.
This author is Deputy Managing Director of Max Life Insurance.
