Policybazaar.com recently released an insurance consumer insights report based on a survey of 3,300 respondents across 27 cities. The report covers various aspects, including the reasons for buying or not buying insurance and parameters that influence purchase decisions. Here are three key findings and takeaways for policyholders from the survey :

Finding #1: Awareness doesn’t translate to ownership

The survey indicates that while 96 per cent of respondents were aware of health insurance, a lower 69 per cent have considered it, an even lower 52 per cent owned it and only a mere 43 per cent are current owners. The awareness to ownership ‘funnel’ is even more discouraging for life insurance where 85 per cent are aware but only 28 per cent own life insurance.

Of the non-users/non-owners in health or life insurance, cost and lack of funds was the leading reason, according to the survey.

Also read: Is awareness about life insurance rising in India?

Another set of reasons for lack of policy ownership is related to product confusion, paperwork involved and lack of understanding. According to the survey, an offline network of family/friends and agents leads the information sources for research and channel of purchase (agents). In fact, the choice of agent in some cases was derived from family/friends, indicating its importance. Google search, YouTube and comparison websites also influence information, according to the survey.

Agents can do the ‘hand-holding’ to clear product confusion, but the best way to shake off a lack of understanding is to visit each insurer’s website and gain first-hand knowledge. An early start to insurance clears the cost hurdle as well. The PED waiting period is cleared earlier, no-claim bonus is accumulated and premiums should be comparatively lower.

Finding #2: Insurance not seen as separate from investment, tax saving tool

The survey shows that customers still don’t look at premium payments as a necessary expense for future protection against risks. Instead, they still treat insurance as a financial product. This is clear from the fact that they cited investment in other options (other than insurance) with higher returns as a reason for letting their life insurance policy lapse.

The survey also points out that ‘Push’ is the largest trigger for purchase of insurance, led by family and friends, agents and banks. Financial prudence, led by starting a family, job change or inadequacy of corporate cover, which should essentially drive insurance purchase, ranks lower than push and fear-based triggers. Even within financial prudence, tax savings via health and life insurance is a leading trigger.

Also read: Understanding maternity insurance: Coverage, conditions, and options

However, the attitude slowly seems to be changing, especially among the younger generation. The survey does indicate that 33 per cent of 18-30-year-olds are now showing increasing preference for term insurance — which is a pure protection product — compared to 18 per cent in 2019. Having a term insurance to just cover the risk of loss of life and using other investment products for compounding wealth is the ideal way to go about.

With the new tax regime becoming the ‘default’ option from this year, tax-saving investments will no longer be necessary for those choosing the new regime. Often, at the eleventh hour, ill-fitting insurance policies with hefty premiums are purchased for saving taxes. ‘Push’ from sellers who, in turn, earn good commissions on them plays a major role in this. These customers can now exercise more prudence and choose a suitable product.

Finding #3: Lower cost, wide hospital network, high claim settlement most sought after

Cost or lower cost for higher coverage in both health (disease cover) and life (covered amount) is a leading parameter for filtering policies by customers, according to the survey. The survey points to cost as being a leading impediment. As mentioned earlier, you can reduce costs by taking the policy early, by using top-ups or super top-ups or family floaters. But on an overall basis, costing cannot improve unless mass adoption of insurance is achieved. The report mentions mortality protection gap of 91 per cent and the health protection gap at 35 per cent.

Network of hospitals and nearby hospitals is also a parameter in choosing health insurance. However, with availability of cash reimbursement, ideally this should not be a barrier. High claim settlement ratio, time taken for settlement and dedicated support rightly figure in life insurance parameters.

But the same reason, when used for buying health insurance, can produce mixed results. Claim settlement in health is undifferentiated at 95-98 per cent claim settlement rates for all leading insurers. The number also misses the extent of the actual claim serviced by the insurer which sometimes can be a lot. Interestingly, add-ons linked to OPD and shorter waiting times (for PED) also figure in parameters for health insurance. However, customers should note that non-disclosure of PED is among the leading causes for claim rejection and hence, they should be upfront and not cover it up because of higher wait times.

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