MUMBAI: The term protection market in the life insurance industry is set to heat up with insurers readying to launch Saral — a standard term policy that has been designed by the regulator, where insurers are expected to compete on price.
In October, the Insurance Regulatory and Development Authority of India (Irdai) directed all life insurers to start selling from January 1, 2021 the Saral Jeevan Bima — a cover with standard wording for sum insured ranging from Rs 5 lakh to Rs 25 lakh. Although insurers have been wary of selling lower value term covers, the rise in demand for term cover during the pandemic has shifted focus to protection.
According to ICICI Prudential Life Insurance MD & CEO N S Kannan, there has been a 70% increase in online search for ‘term insurance’ during the pandemic. “Retail sum insured has gone up by 5-6% during this period. Sum insured is growing ahead of GDP, which is good news for industry,” said Kannan. At the same time, claims have been less than what was expected during the pandemic. “We had created an additional reserve, which did not get used up. This is a bit sad as it is an indication that insurance penetration is low,” he said.
Besides ICICI Prudential, Life Insurance Corporation and other private companies are working on the product “We fully support this consumer-centric initiative by the regulator. We are keen to go ahead with it and have accordingly filed our product,” said Tata AIA Life CFO & product head Samit Upadhyay.
Hitherto insurers have been competing for the high end of the term market with a sum insured over Rs 25 lakh as the mortality experience in that demography is better and they can get reinsurance protection. In the very low end, protection comes from government schemes like PM Jeevan Jyoti Bima Yojana. The Irdai push is to cover the missing middle. “There are around six crore people filing income tax returns, while only sixty lakh hold term insurance policies, indicating an insurance penetration of 10%,” said Kannan.
The Saral Bima makes it easier for all as buyers need not check the fine print, distributors do not have much explaining to do and the regulator does not have to review the plans of each company.