Yesterday, I was talking to one of my clients and he told me that he is aggressively working with his extended family to get their Life and health insured. He has helped his brother-in-law purchase it and is following up with the others.
He purchased his Term Life and Health Insurance policies post the financial planning exercise last year. At that time, he did not realize the need to encourage and insure his extended family members. But COVID has totally changed his perception about the need for insurance security for Life and health for one and all.
I truly believe that while COVID has been painful for most of us, there could not be any better trigger than this for us to get insured and better prepared for any unfortunate event in future.
In India, Risk Management in the context of the financial security of a family has not been well understood.
The most important risk for a family is the loss of income on the demise of an earning family member. With approximately 25% of lives Insured (Source: IRDA, 2019), Indians are grossly underinsured. The reasons are many.
The need for this risk is not realized till the time one has faced it and by then it is too late. There is insufficient education to encourage people to purchase pure Term Life Insurance despite it being inexpensive. For people at large, it is difficult to comprehend the benefits of this product as there is no associated maturity benefit. In contrast, the insurance cum investment products with maturity benefits are aggressively promoted by the intermediaries in search of higher commissions. These products provide inadequate Term Life Insurance coverage and hence little help to the family members in case of unfortunate events.
The second important risk is the inability of a family to afford a very large expense on family medical treatment. With only 35% of the Indians (Source: IRDA, 2020) insured for health insurance, this number is abysmally low compared to the global standards. Again, there is a poor understanding of the advantages of purchasing health insurance. People are not very sure how a premium paid over 20-30 years during healthy life will come in handy during old age when they need it. It has been seen that in the long run, the insurance companies who provide better claims experience, will sustain and excel. Hence it is in their best interest to ensure that the claims process is fair and transparent otherwise the insured will port to another Insurer. We hope that the regulator will continue to make the retail insurance business more sustainable, consumer sensitive and friendly. I truly believe that the purchase of health insurance will secure families and give them peace of mind.
The second wave of the pandemic has taken people by surprise. The infection curve has quickly gone off the charts. The new mutation of the virus is very virulent and deadly. A significant number of people are requiring hospitalization and the treatment expense has gone up considerably. The health infrastructure is stretched beyond imagination. The death count has gone up drastically and we are losing younger people without any comorbidities. It is hard to find a single family who has not lost a person in their acquaintance.
Needless to say that the insurance need has become real and immediate. People are realizing that health insurance would allow them to take worry-free quick decisions which are the need of the hour. A Term Life insurance will ensure the smooth life of the family post the unfortunate demise of the breadwinner in the family.
I hope that if you are still uninsured, you will get insured soon. It would be helpful if you could reach out to your extended family to get them insured. It would be nice if you could guide your domestic help to get insured under PMJJBY (Life Insurance) or guide them to take advantage of AB-PMJAY (health insurance scheme).
You may also like to read Solving the maze of a health insurance purchase.
The writer is a SEBI Registered Investment Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services. To know more about him, click on https://finmyn.com/about/.