NiveshKarBefikar With Tarun Mathur: How India Is Taking Its Protection Goals Seriously

As per the latest IRDAI’s report, the penetration level of life insurance in India is merely 2.74%. This is certainly a very worrying figure as the social and economic cost of being uninsured can be massive. The economic progress that an individual makes throughout his life by working hard can get wiped off in a flash if there's an unfortunate event. Therefore, the importance of income protection becomes evident. Today, when the world is facing an unprecedented health and economic crisis in the form of Covid-19, it is perhaps a good time for all of us as individuals to reflect on this area.

In continuation of its consumer awareness initiatives, Policybazaar organized protection goals special webinar, under its Nivesh Kar Befikar series. The webinar was hosted by Vivek Law, founder, and editor-in-chief of The MoneyMile, who spoke to Tarun Mathur, Co-Founder and Chief Business Officer, Policybazaar. Here are the edited excerpts from the Q&A session:

Q.Would you say that people have increasingly become more interested in insurance now during this Covid period? Is the fear of losing your life and leaving your loved ones helpless sinking in into people because that's something that we've struggled with to convince the importance of life insurance.
Absolutely, the penetration of insurance in India is less than 3% and those in the business have always wondered, what would be that turning point for our country to be more interested in protection products. You correctly mentioned is the fear that's come because of Covid-19 among people. When the lockdown was announced in March, we saw an instant rise in demand and conversions on our platform which means more and more people thought that it was required to get protection for their families. There isn’t fear of death or fear of sickness only, there’s also the insecurity whether you actually protected your families or not in your absence. Will you leave them with debt or assets?

Q. A few months ago, there was an increase in term insurance prices as per reports because the reinsurers increased their prices. Recently, some other reports suggested that because of Covid and the claims going up, there could be a repricing again and term insurance prices could go up. What is your understanding of the pricing at this point in time?
The mortality rate due to Covid can be probably used as a guiding light for what would happen during any pandemic and I hope we never see one but if this happens again in the next 30- 50 years, there may be a chance that the mortality rate goes up but the mortality rate in India has been quite under control or it's less than a lot of the large diseases.
As an event, this would be seen as a spike but I don't foresee many changes in the pricing. Having said that, we haven't seen the end of Covid yet, so it would always be prudent to wait and watch. This period is more about protecting ourselves.

Q. During the lockdown, people were stuck to their homes and they couldn't step out. How was the digital journey during this period? Were people able to complete the entire process of buying a life insurance policy completely online?
In life insurance, we need to do medicals for customers which are mandatory and need to have documentation in place. However, digital was a go-to point for customers because we were able to get documents digitally. There was no requirement for any physical documentation. A large part of customers were being able to speak to a tele representative for medicals. It’s very heartening to see a lot of change in the underwriting of insurance companies where they were able to move to tele medicals and be able to assist customers and get policies for them purely based on the questions asked.

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Q. Do you foresee this continuing because these are practices that have probably emerged during Covid but these are good practices from a consumer’s point of view rather than making rounds of hospitals and clinics trying to get medicals done? 
I think change is upon us and it's here to stay. All of us are working from home. We're doing everything that we thought was never possible on our laptops and our mobiles. There will be some amount of offline activity for customers who have some sort of illness. For the general public, it will be very easy to sit at home and be able to go on the entire buying journey. This whole pandemic has given a huge boost to the online purchase of insurance. I don't foresee this going back to the way it was because it's actually quite a hassle to get your medicals done. You're all so scared to contract any disease and not just Covid.

Q. Insurers are talking mostly about purchasing at least Rs 1 crore term cover. Some are now talking about Rs 1.5-2 crores cover. Traditionally, Indians were used to buying some money back policy or traditional plan of Rs 5-10 lacs cover and we thought we were insured. How do you go about figuring out how much Insurance do I need? And what according to you is the right amount for say a 30 year old young professional.
It’s entirely dependent on your income and your lifestyle. The way I look at this is what is my spending today and in my absence, how much expenses the family needs to continue living the same lifestyle taking inflation into account. One should take a term cover of 15-20 X of their salary. Also, keep upgrading your cover as income increases. Let's say you have a Rs 10 lacs salary today. I would suggest that Rs 1 crore cover is fine but if your income increases to Rs 20 lacs, then you must change it to Rs 4 crores.

Q. I'm planning to buy term life insurance for myself. It is my first purchase. Please suggest what I should look for in the best plans that I should consider?
—From Amit Yadav
Go for a minimum of Rs 1-1.5 crore cover. There are plans like I Protect Smart from ICICI Prudential, HDFC Life, TATA AIA. A lot of these plans are very cheap. You can compare them and see what features suit best for you.
 
Q. How has been the response of term insurance during Covid-19?
—From Akash Choubey
We've seen a huge surge in the number of people comparing and buying policies. This would probably be the highest ever and the pandemic is actually a reflection of how we all feel about the protection of our families and the income that we are fortunate enough to receive. The awareness level for protection has increased.

Q. I'm 65 years old and do not have any term plan. Please suggest the options available for me.
—From Harjeet Singh Manic
It is difficult to get a plan at a later age because it becomes expensive but I think that all the top companies have plans up to the age of 75 and you should move very quickly. Also, please remember that your birthday is the day that the premium increases. So if you're approaching your birthday, it's time to buy today. Once you buy it, the premium stays at the same levels for a lifetime.

Q. Can I port my term insurance from one service provider to the other? 
—From Malaya Patra
There is a concept of porting in health insurance, which means that there are a lot of benefits added over time as you stay within the policy. While term insurance benefits don’t change year on year. So there is no actual requirement of porting. If you're not happy with your service provider, you can just stop paying the premiums and then send a cancellation email and simply buy another plan.

Q. You rightly mentioned that if say you bought a plan at 30 years of age and you bought it for X amount and today at 40 you feel like changing your provider when you buy the new plan, your rate will be determined at your age of 40 and not of 30. So why would you want to shift out? Because as you said there is no extra benefit that is being provided except the claim should be settled and that is something the regulator would ensure that for every insurance company.
Absolutely true. In term life insurance you are not interacting with the insurance company till the time of claim. So it's also quite difficult to see why you won’t be happy after so many years and why would you want to pay a higher premium? If you want to engage with another company, why don't you buy another cover of the amount that you can think is additionally required and retain your own policy. So you'd rather stay with the same company. Because there’s IRDAI to protect and solvency margins that insurance companies keep. So, there is no real danger to what you protected and what your family will get in case of your sad demise.

Q. I'm 27 years old and I'm planning to buy term insurance worth Rs 75 lac rupees. Please suggest what all I should look for and how the premium will be charged?
—From Shashank
When you buy a term insurance policy, it's very important to remember a few aspects. You should always choose a longer-term for the policy. The second thing is the sum insured which should be anywhere between 15 to 20X of your income. At Policybazaar, we believe in 3Ds which are death, disease, and disability. Let's take an example if there is some critical illness, you get some sort of benefit from your term plan that you get paid at the time of contracting the illness.

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Q. In the middle of Covid-19, what are the new innovations that have been made to help the consumer?
—From Bharat Giani
Innovation is happening towards the process side. The ability to buy purely digitally has come about and I think we should take advantage of it. None of us want to meet somebody offline, not visit medical centers. Documentation and medicals which were happening offline are now online. The adoption of digital is helping customers buy products seamlessly. There will be more innovation as the industry learns about how the pandemic unfolds.

Q. What are the benefits of buying an insurance policy online? Are there any reward points or extra discounts?
—From Neerja Pal Singh
The biggest advantage of buying policies online is that you get a 3-7% discount as compared to buying through an agent. If I say quite bluntly, there's absolutely no advantage of buying policies from an agent because the only time that term life insurance policy will support you is at the time of death. So there is no kind of assistance that is required in between. From a process perspective, you're able to buy online through telemedical and documents can be sent, through emails or Whatsapp. All your policies can be saved in a digital Locker.

Q.I'm planning to buy term life insurance but confused about whether should I buy it or not? How important is it to have term insurance, especially during Covid-19?
—From Seema
There is absolutely no doubt, just buy it. You're protecting your family and the income that you are currently growing. The prices would be in 1000s  for the entire year. Buy early and don’t procrastinate. The pandemic has taught us how risky it is even to meet people. It’s very important to look after your loved ones because they are the ones who will actually suffer in case you are not there.

Q.Covid-19 has been unpredictable so far. How should we manage our finances during these times? And should we keep paying the premiums for health and life insurance?
—From Muhammad Saifulla
There is an ability to negotiate and change your mode of payment from annual payment mode to monthly. So, it becomes a very small amount and makes it more palatable. Currently, premium holidays are not available.

Q.I'm planning to buy a term plan and it is my first insurance purchase as I am new to insurance. Please suggest what according to you will be the dimensions of the best term plan?
—From Kapil Bhatker
The primary thing that you should look for is what is the highest sum insured you will get for the lowest price. Try to go up to 20X of your income. In terms of features, you should look at death, disease, and disability. There should be a component of critical illness. There are two types of plans. One is where you have a critical illness inbuilt into the plan and the other one is where you buy it as a top-up cover. For example, in the ICICI Prudential term plan, you have a premium waiver and a terminal illness both which means that if something happens to you, like disability or disease, it will cover very early. That’s available in PNB MetLife and HDFC also.

Q. Typically for a 30-year old, what would be the premium amount annually?
It would range anywhere between Rs 7,000-12,000.

Q.What would determine this range of 7 to 12? It's a big range. Would it be because of a different insurer or your health consideration?
Every company prices death rate differently and as you said at the beginning itself that there has been a price change in some companies. So, it's a great opportunity to look at a Rs 7000 term plan. If you have a critical illness cover, accelerated benefits, then the premium will be slightly higher. A simple vanilla term policy can be bought for as low as Rs 7,000

Q. Is there a huge difference in price between insurers or is it very marginal because it's a fairly, low premium business?
It exists today but probably won't exist after some time as I mentioned that there is a price change happening. Some companies have changed pricing so the differential seems large today, but I think tomorrow the premium changes won’t be so much. They would be in the range of about 15 to 25% at best.

Q. If I want to foreclose my traditional policy in between the policy period, what will be the impact on my sum assured payment? 
—From Aiyapan Ramanujan
There will be some surrender charges that you might have to pay depending on the traditional plan. The calculation is done by the insurance company based upon how many years you have spent. You would have got a document that defines this when you bought the product or you could just approach the company. But you should stop paying but not close the plan and stay with it during the term so that you don't lose the benefit of what you've already invested because the surrender amounts are typically, quite high and it's not prudent to close the plan. You will still get the benefits post the term of the policy. Invest wherever you feel comfortable. There's a lot of low-cost ULIPS with capital guarantee which are the best investments when it comes to term insurance.

Q. If you stop paying your premium the insurance cover will go away if something were to happen to you?
That’s true. The insurance cover would cease to exist immediately.

Q. I'm 33 years old and was planning to buy my first term plan but unable to decide whether I need one. The portal shows the same premium for a 30 and a 33 years old person. Should I push this purchase for some more time?
—From Suraj Kumar
Definitely not. Currently, the premiums are the lowest that they will ever be. A lot of companies have gone through price change activity while there are still some companies which haven’t and if you buy them today, you'll be able to take advantage of that.

Q. Is the pricing done every five years of age or how does it work? Because he's saying the premium is the same for a 30-year-old versus a 33-year-old but probably when he turns 35, will the premium surge for him? 
Most plans have a price change every year. So, if I'm 33 today and the premium is Rs 10,000, at the age of 34, it will probably be Rs 10,500. There are some plans however in the market which work on a five years premium change basis but the price differential will be higher.
 
Q. I might be 30 today and might want to get Rs 20 lacs cover but by the time I'm 35, I want to keep increasing the cover as my income goes up and my liabilities go up. Can I top up my existing cover and at what rate and pricing will that be done?
The top-up of covers is possible between the same company to another company. The pricing however works on depending upon the pricing at that time. So that's why I said that you should always go for the highest coverage at the lowest possible price. Some companies offer increasing cover within the same policy and some don’t.

Q. Is there a monthly payment option or do I have to pay annually? If there is a monthly payment, how is the interest charged? Which option is better- monthly payment or annual payment?
—From Joes
Customers should go for annual payment mode. The premium varies from insurer to insurer. The sum of the premium paid in the monthly mode for 12 months is about 78% higher than the annual payment. It’s an independent choice. There’s a discount available when buying annually rather than monthly.

Q.I have recently bought a health insurance plan and wanted to understand how I can make the claim in case required?
-From Arju Sheikh
It’s not a difficult process. If you land up in the hospital and don't have your policy copy, you only need to call up your provider. Go online. Check with the network hospital. There’s a TPA desk at the network hospital and you need to give your policy number and everything else is taken care of. Suppose, the hospitalization has already happened, then you need to apply for a reimbursement. You need to have the original bill of the hospital. There’s a claim form available online which you need to download and its five-minute activity to apply digitally. It takes about three days for the claims underwriter to go through your form and about 7 days to settle. However, the best thing to do is to land up in the hospital and there are TPA desks or if you bought the policy from Policybazaar, just launch the claim on the app.

Q. For salary class people, which plans will be the best for future security with lower premiums. What according to you is the adequate sum assured amount one should go for? 
—From Binod Koirala
Take a cover of about 20X of your annual salary. So, if your annual salary is Rs 10 lacs, you should buy a Rs 2 crore term cover.
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