The Hindu Business Line : Choosing an insurance policy

Working women should invest in a term plan that provides pure risk cover and no survival benefits. A low premium outgo will fetch the policyholder a sizeable cover.

When it comes to purchasing insurance policies, women certainly have an edge over their male counterparts. To begin with, the premiums that they pay for a given policy are lower than what men of the same age pay. This is a benefit that is conferred upon them to account for their higher life expectancy.

One might be led to think that the preferential premium rates should serve as incentive enough for women to queue up at the doors of insurance companies. But a look at the data gathered by the Central Statistical Organisation (CSO) on the basis of information furnished by the Life Insurance Corporation (LIC) paints a different picture. It shows that women, as a percentage of the total insured population in the country, are still lower than 20 per cent. The figure is the same for women in the 25-45 age group, which can be considered as the prime period of their working life.

Should this statistic be interpreted as indicating that women tend to be apathetic towards insurance? Not really. If you consider the proportion of women employed in urban areas in relation to the total number of women employed, the percentage of those insured does not appear as low as it does in isolation. On the contrary, some insurance companies also state that the percentage of women they insure is far higher than what emerges from information supplied by the CSO.

Says S. Muralidharan, Chief Marketing Officer of SBI Life Insurance, a leading private player in the life insurance space, "Roughly about 35 to 40 per cent of our policies are purchased by women, and those in the age group of 25 to 35 years constitute the highest percentage."

With the increasing levels of urbanisation as well as the higher level of education, women are also increasingly turning career oriented. And as the very purpose of insurance is to protect one's earnings stream against any unfortunate development, one could see a higher proportion of women deciding on insurance plans for themselves.

Muralidharan agrees. "Traditional insurance buying behaviour suggests that women have been influencers rather than buyers of insurance. It is not hard to see why, given the sociological factors of the tradition-bound Indian society.

"However, with the emergence of a vast middle class characterised by high levels of education and urban living, this is beginning to change. Women are making more and more insurance decisions and this trend will only increase," he says.

As women go about choosing insurance plans independently, are we likely to see an increase in the number of plans targeted at women?

According to Shikha Sharma, Managing Director of ICICI Prudential Life Insurance, plans that are currently available in the market are flexible and designed in such a way that they appeal equally to both men and women. In her view, introducing riders that cover illnesses specific to women could bring in the element of differentiation. However, she points out, riders that cover critical illnesses are fairly complex to comprehend and could do with further simplification.

However, not all are convinced that policies on women do indeed entail a lesser premium outgo than their male counterparts.

According to Sumitra Krishnan, an executive who checked out quite a few insurance plans before opting for one, in her case underwriting expenses resulted in the premium outflow being far higher than what a male of the same age would have paid. Medical tests administered by insurance companies, she reckons, can be used as a device to charge higher premiums.

Insurance industry sources are quick to counter this apprehension and say that premiums are indeed a function of an individual's medical history and are not cast in stone. They also point out that inflating premiums would be detrimental to their business interests as they risk losing out customers to the competition.

In several cases, working women who choose to opt for insurance policies may, at a later date, decide to give up their jobs for purely personal considerations such as bringing up a child. While the break is a temporary one for some, it may well turn out to be permanent in the case of a few others. The possibility of the latter happening also has to be borne in mind by the underwriters at the time of writing out the policy.

Shikha of ICICI Prudential says that underwriters base their decision on the information available at the time of writing out the policy. The risk of the policyholder's income stream drying up a few years down the line on account of having given up her job is not factored in at the time of issuing the policy, she says.

From among the various plans on offer at present, working women, who do not have any form of insurance currently, should seriously consider investing in a term plan that provides pure risk cover and no survival benefits. A low premium outgo will fetch the policyholder a sizeable cover, and as this plan represents the purest form of insurance, it must definitely figure as part of any working woman's investment portfolio.

Other savings-oriented insurance plans such as endowment plans and money-back plans can be considered if one already holds a term plan.

In the case of the latter, the discipline of savings that women tend to be better at can be harnessed to build up a corpus that comes in handy to fund children's higher education or marriage expenses. Premiums, however, for investment-oriented plans tend to be much higher compared to term plans.

Tax breaks — "a key component of my investing decision," in the words of Sheela Krishnan, an executive in a bank, and a feature that most women attach importance to when investing — are also an added attraction for investments in insurance.

The importance of insurance for women, according to Muralidharan, is increasing due to the breakdown of the traditional support system extended by the joint-family system and the higher incidence of single parent families where the woman takes responsibility of her children.

He sums it up nicely by stating, "It makes sense for working women to insure themselves for the benefit of their families. Working women should take a fresh look at insurance for themselves and not merely depend on what their spouses may have taken on their own lives."

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