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High proportion of residents in secondary cities keen on life & health insurance

Residents in Tier-2 and 3 cities in India show a growing propensity to buy insurance, according to an online survey by Policybazaar, one of India’s largest online insurance marketplaces.

In health insurance, the highest proportion of respondents willing to renew their health cover is 89% and they hail from Tier-2 cities, as compared to 77% from Tier-1. A similar trend is observed in term insurance, where 59% of respondents who want to increase their coverage belong to tier-3 cities, as compared to 26% from Tier-1 cities.

Policybazaar polled 5,000 consumers in the survey to understand the shift in consumer sentiment towards buying insurance, household finances and investments over the last two years of the COVID-19 pandemic.

The survey results clearly point towards the sense of urgency spurred by the pandemic with respect to insurance protection across the country.

Health Insurance: Distinct rise in insurance purchase/renewal after the pandemic

The pandemic has definitely given a cognitive push when it comes to health insurance purchase. Out of the respondents who had contracted COVID, 25% were hospitalized. The survey found out that 18% of them ended up spending over INR1.5m ($19,377), and 22% were not adequately covered by their existing policy. Also, 13% of those who contracted COVID did not have health insurance. These figures demonstrate that one should opt for insurance coverage of at least INR1.5-2.0m for each family member, says Policybazaar.

The survey results also show that as many as 62% of the total number of respondents had an active policy and do not just depend on their corporate cover.

catalyst

The figures vouch for the fact that COVID has acted as a catalyst in health insurance purchase. While 50% of these policies were bought after the first wave of COVID, 41% were purchased after the Delta wave. Also, 80% of these policies were family floater plans, thereby revealing a higher inclination towards ensuring sufficient coverage for the entire family.

A significant proportion of 84% of respondents did not have to serve a cooling-off period. Earlier, a cooling-off period of 3-6 months was applied wherein people recovering from COVID could not buy a policy within this period. These figures demonstrate insurers’ efforts to expand the safety net and ensure protection. Moreover, over 80% of respondents still show a willingness to renew their health insurance and 35% of them plan to increase their coverage. The reasons cited for this are rising medical inflation, financial instability and the need to cover more family members.

term insurance: More inclination towards larger cover

The survey results show the respondents’ inclination to opt for cover to ensure protection for their dependents. As of April 2022, 60% of the respondents had an active term insurance policy.

While 55% of people prefer term insurance because they want a larger cover at a lower premium, 24% want enhanced protection over and above their existing life insurance policy. This depicts an increased awareness towards the benefits of a higher cover among the buyers, given these uncertain times.

The purchasing trends in term insurance bear quite a stark resemblance to that in health insurance. While 47% of the active term policies were bought after the first wave of COVID, 40% of them were purchased after the second wave.

While the pandemic might have triggered the purchase of insurance, as many as 78% of respondents want to continue their insurance policy even as things begin to get back to normal. 39% of them wish to buy a higher cover, with the highest proportion of respondents (59%) belonging to tier-3 cities.

Investment: Evident shift from tax-saving to wealth creation

Conventionally, most buyers buy insurance to save on taxes. However, the survey responses indicate that 54% of the respondents are consciously choosing investment-cum-insurance products for wealth creation.

Also, 50% of the respondents have been financially impacted due to COVID. Even after two years of the pandemic, out of these, only 25% could recover to the pre-pandemic income levels, while the rest are still earning a lower income or looking for jobs. This further establishes the need for robust financial security to battle such uncertainties.

Talking about the propensity to invest, three-quarters of the respondents save or invest their income. However, the amount invested by 53% of them is below the recommended benchmark of 30% of the total income. One noteworthy finding here is that the propensity to invest appears to be higher among females. It is concluded that 30% of females save or invest over the recommended benchmark of their monthly income as opposed to 20% of males.

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