The Hindu Business Line : Young and assured

There was a time when the mention of the word `insurance' would elicit blank looks from those in their 20s. But then, that was also a time when those in their 20s didn't earn the kind of moolah they do today. "The job scenario has changed and with it attitudes towards money, investments and, of course, insurance," says Ashim Chatterjee, 59, a father of two. When he started work as a marine engineer at the age of 19, his father got him an LIC policy. "Helps save tax and is good for a stable future," was the sage advice that came with it. Chatterjee hasn't regretted it for a moment. In fact, the minute both his daughters started earning, LIC policies formed the bulk of their investment portfolios.

Starting young

But there's more to insurance than LIC. Like employment options, the market today is an exciting place with insurance options galore. A recent paper by Associated Chambers of Commerce and Industry of India (ASSOCHAM) states that the rural and semi-urban life insurance business is poised to touch $20 billion and in urban areas, it is expected to touch $15 billion. "The youth are an interesting demographic, especially those under the age of 30. With the BPO boom and large numbers of youth joining the workforce, disposable incomes are going up and the need to invest this wisely for the future is gradually taking priority. As a result, they are now investing in various financial products, including insurance," says Bhargav Dasgupta, Executive Director, ICICI Prudential Life Insurance.

Meet Sandeep Agarwal, all of 27, a senior official at a leading Indian bank in Mumbai. He has already taken two polices — ICICI Prudential's Cancer Care and Health Assure policies. "In addition to these, I have opted for MetLife and IFFCO Tokio General Insurance (life and accident cover respectively)," he says. Taken for 70 years at a premium of Rs 3,320 per annum, the cancer care policy covers him against cancer at all stages of the disease.

Investment

What has influenced such trends in the country? "Insurance trends have changed with the introduction of unit-linked plans. People are opting for unit-linked products where they have the authority to decide on the investment of funds amongst the available alternatives. At one point of time it was felt that term insurance policies (meaning pure risk plans) would be popular, especially with young people, but this is not true," says Akhila Srinivasan, Managing Director, Shriram Life Insurance.

C. Raman, 27, an engineer, agrees. "My employer offered me group insurance which was not enough to save tax and for security. When I came to know more about security and investment with tax savings, I took three policies of Rs 25 lakh sum assured." His policies are a mixture of money-back schemes, unit linked investments and pure risk coverage with the employer's group insurance scheme.

Insurance, for some, is a good investment option as well. As R. Balajee, software engineer, says, "Insurance is good investment, mainly in a unit-linked scheme which gives the option of investing in Indian stock market equities which is a help for people like us who do not have much knowledge of the stock market. In ULIP (unit-linked insurance plan) we get both good returns and risk coverage with tax benefit under section 80 C."

Senthil Kumar, an engineer, observes that youngsters from all income groups consider investing in insurance a good idea, as the insurance cover taken at a younger age comes with the advantage of a lower premium. "If someone takes a policy at the age of 23 for a sum assured of Rs 3 lakh, the premium per annum will be much lesser than for someone who takes the same policy at the age of 33. In the case of any eventuality the policyholder's assignee or nominee gets both the sum assured and the market value (NAV) of the units as on that date."

Akhila advises, "With the advent of unit-linked policies in the Indian market, the insuring public think that insurance is a good source of investment, but please remember that this would be a better investment if the money is kept with the insurance company for a longer time period, say at least about 6-7 years. Those who want to invest for a shorter time would be better off with mutual funds or the share market."

Health matters

"Most Indians lack cover against critical illness," said the Health Matters Index 2006, a survey conducted by Tata AIG Life which also indicated that most Indians were less financially protected than their counterparts in other South East Asian countries. This trend is certainly undergoing a major change. In April 2006, ICICI Prudential launched its Cancer Care policy and an interesting aspect of the success of this policy is the customer demographic.

Today, policy buyers are getting younger and younger with the average age of a Cancer Care policy buyer being 27-29. A majority of them are single too, thus signifying the growing ownership for one's own safety (a trait common among the married who feel responsible towards their families). "In FY06, the life insurance industry garnered premiums to the tune of about Rs 26,000 crore. This year, the industry has shown a growth of about 100 per cent year-on-year, making it one of the fastest growing industries," says Dasgupta.

Health is an important segment in the insurance industry and different people have different motives for investing here. Priyanka Badlani, 25, sales manager in a leading MNC bank in Mumbai says, "I have two health insurance policies. In my opinion health insurance policies are far better than Mediclaim. Nobody from my family has suffered from cancer but my best friend's mother suffers from it and I am aware of the cost of treatment. As the incidences of cancer are growing by the day, preventive measures are a must."

Subrangshu Sekhar Biswas, 30, a senior bank official in Kolkata, agrees. "Now I know I will be financially secure and my family will be spared the financial burden in case anything happens to me."

Bima checklist

"Complete insurance protection for you and your family would comprise life insurance and health insurance. Traditional life insurance safeguards your family against a financial setback in the event of your death. On the other hand, health insurance plans, like the ones launched by life insurance companies, pay a predetermined lumpsum on the diagnosis of any one of a number of life-threatening illnesses or certain types of surgery," says Bhargav Dasgupta, Executive Director, ICICI Prudential Life Insurance.

He outlines some key factors to be considered when investing in an insurance policy, whether life or health.

Assess your risk: Youth today must understand and assess their personal risk factors and invest in a policy that best covers them. For example, a youngster who smokes heavily or has someone in the family with cancer could consider a cancer care policy based on both the genetic and behavioural risks.

Personal finances: Personal and family finances must be factored in before deciding on a policy and the premium payable.

Cost analysis: Assess the treatment cost associated with various diseases before deciding on a cover that can provide adequate benefits in the event of an illness. In the case of a critical illness cover that covers six diseases, one needs to consider one's personal risks and take the maximum cover suited for that.

Account for overheads: In the case of critical illness covers, it is essential to account for overhead expenses or incidental and non-medical expenditure including travel, loss of income and boarding and lodging for the family which can be as high as 35 per cent of the total treatment cost. Choose a policy that helps cover these expenses.

Women's special

Gender is usually of no consequence where insurance is concerned but some polices do have special clauses for women. UTI Bank Smart Privilege customers are offered Bajaj Allianz Smart Advantage, a critical illness insurance for women.

"It's our life expectancy that makes them so generous," says a gleeful Kuntalla, 25, a BPO employee. And she does have a point.

The higher life expectancy also helps because women pay lesser premiums compared to men of an equal age.

"Look for women friendly clauses when opting for a policy," says Abhijit Das, an insurance broker for LIC. A case in point is Bajaj Allianz's Mahila Gain benefit that covers women's illnesses, and good old LIC's Jeevan Bharati, a money-back plan especially for women.

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Young and assured