Higher Propensity To Buy Insurance In Tier I, II Cities: Survey

Policybazaar, one of India’s largest online insurance marketplaces, conducted an online survey to understand the changing consumer sentiment towards insurance purchase, household finances and investments over the last two years of the pandemic. Policybazaar surveyed 5000 consumers to closely understand the behavioral shift in insurance buying trends. 

Interestingly, the findings revealed a growing level of propensity to buy insurance, especially in tier-2 and 3 cities of India. At 89 per cent, the highest number of respondents willing to renew their health cover belong to tier-2 cities, as compared to 77 per cent from tier-1. Similar trends were observed in term insurance, where 59 per cent of respondents who want to increase their coverage belong to tier-3 cities, as compared to 26 per cent from tier-1 cities. The survey results clearly point towards the sense of urgency spurred by the pandemic with respect to insurance awareness across the country. 

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

The pandemic has definitely given the cognitive push when it comes to health insurance purchase. Out of the respondents who had contracted Covid, 25 per cent * were hospitalized. We found out that 18 per cent of them ended up spending over Rs 15 lakhs, and 22per cent were not adequately covered by their existing policy. Also, it is disquieting to see that 13per cent of those who got Covid did not have health insurance in place. These figures clearly demonstrate that one should opt for at least Rs 15-20 lakhs coverage for each family member. 

However, health insurance purchase trends definitely drive positive optimism. As many as 62 per cent of the total respondents had an active policy and didn’t just depend on their corporate cover. The figures also vouched for the fact that Covid had acted as a catalyst in health insurance purchases. While 50 per cent of these policies were bought after Covid first wave, 41per cent were purchased after the Delta wave. Also, 80 per cent of these policies were family floater plans, thereby revealing a higher inclination towards ensuring sufficient coverage for the entire family. 

Also, a significant proportion of 84 per cent of respondents did not have to serve a cooling-off period. Earlier, a cooling-off period of 3 to 6 months was applied wherein people recovering from Covid could not buy a policy before completing this duration. These figures demonstrate the insurers’ effort to expand the safety net and ensure maximum protection. Moreover, even as Covid’s graph continues to be erratic, over 80 per cent of respondents still show a willingness to renew their health insurance and 35 per cent of them plan to increase their cover. The reasons cited for the same are rising medical inflation, financial instability and covering more family members. Health insurance is, therefore, seen as an effective shield to provide 360-degree protection against these.

Term insurance overview: More inclination towards larger cover

Analyzing term insurance buying behaviour brings out the respondents’ inclination to opt for larger cover to ensure the protection of their dependents. As of April 2022, 60 per cent of the respondents had an active term insurance policy. While 55 per cent of people prefer term insurance because they want a larger cover for a lower premium, 24 per cent want enhanced protection over and above their existing life insurance policy. This depicts an increased awareness towards benefits of a higher cover policy among the buyers, given these uncertain times.

The purchase trends bear quite a stark resemblance to health insurance. While 47per cent of the active term policies were bought after the first wave, 40 per cent of them were purchased post-second wave. While the pandemic might have triggered the purchase of the policy, as many as 78 per cent of respondents want to continue the policy even as things begin to get back to normal. 39 per cent of them wish to opt for a higher cover, with the highest number of respondents (59%) belonging to tier-3 cities. It’s exhilarating to note that 15 per cent of the active policies are the recently launched independent homemaker term plan on Policybazaar. 

Investment Overview: Evident shift from tax-saving to wealth creation 

Conventionally, most buyers have invested in insurance to save tax. However, the survey responses indicate that 54 per cent of the respondents are consciously choosing investment-cum-insurance products for wealth creation. Also, 50 per cent of the respondents were impacted financially due to Covid. Even after two years of the pandemic, out of these, only 25 per cent could recover to the pre-pandemic 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, 3/4th of the respondents save or invest their income. However, the amount invested by 53 per cent of them is below the recommended benchmark of 30 per cent 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 per cent of females save or invest over the recommended benchmark of their monthly income as opposed to 20 per cent of males. This translates to people now seeing insurance-cum-investment products beyond a mere tax-saving tool and making them a part of their portfolio to gain better returns on their funds.