Arecent report on insurance awareness showed 60 per cent of insured households were not able to clearly understand the extent of the coverage and the benefits being offered under an insurance plan, resulting in lower insurance penetration.
The reasons included affordability, limited choices and poor customer services, according to a report based on the survey conducted by the National Council of Applied Economic Research. The study was commissioned by the Insurance Regulatory and Development Authority.
“The major determining factor was the lack of awareness of life insurance across both rural and urban parts of the country, though a third of uninsured households agreed to opt for insurance, if it was linked to a credit facility. Nearly one-third of the households indicated they were willing to opt for insurance, if it was customised to their needs,” the report said.
The survey also indicated the most important benefit of insurance, as perceived against other forms of savings, was its usefulness in an emergency. The other reason for opting for insurance cover remains appreciation in value and tax benefits. “While opting for an insurance cover, approximately 52 per cent of insured households mentioned usefulness during an emergency as a benefit,” the survey said.
Insurance is seen as a savings and protection tool by the majority of the insured households. The findings are important, considering the regulator has increased lock-in periods for unit-linked policies from three to five years to prevent pre-mature withdrawals or surrenders.
The survey also showed life insurance policyholders saw bulk returns and covers against risks as perceived benefits. “For more than 60 per cent of the insured households, insurance is for security. The households also seem to view life insurance as a good savings tool, as approximately half the insured households aware of life insurance mentioned ‘bulk return in the future’, while another quarter pointed to ‘good return on savings’,” the report said.
