Can Life Insurance be a short term Financial product?
Anshul Kumar Singh
Senior Product Manager @Shriram Finance Limited || Digital Transformation || Strategy || NPD || Driving sustainable and profitable business || Partnership & Alliance || Revenue generation through Customer Centricity
Not too before?but?the insurance industry started as a measure against financial risk.?This?still is the base of an insurance policy. It served the purpose of fighting against uncertainty. However, it also made policyholders too complacent?and?their perception changed from “a risk averse tool” to “an expense for nothing”.?This?can?be attributed?to the fact that other financial products:?
-Are giving returns on the investment
-Are short term investment
-And are helping to serve short term goals
The life insurance industry coped with the audience’s changed mindset?and brought?categorized plans?keeping?the?pillar of insurance?intact along with the return on investment feature like savings plans, retirement plans, etc.
This period is a shift from “Life insurance is a financial tool to help a policyholder in uncertainty” to “Paying a premium for longer term brings hefty lump sum in addition to life cover”.
This feature helped to attract more audience?however, not for long. The increased?adoption of the audience?to invest in the share market has again impacted the adoption of life insurance. Share market in recent years has given more returns in the short term to any other financial tools.?This?is because:
-FDI inflow because of the government’s reforms to improve the ease of doing business in India
领英推荐
-Low interest rates by central banks around the world?
-High return from?certain?sectors (IT/Healthcare)
Although returns are associated with high risks?investments?there is no guaranteed payout. Still, the returns are compelling for the audience to invest more in the share market.?This?is a fight the insurance industry is fighting and will fight. This?shift of audience?from insurance to the share market is evident when we see the 5th year persistency data. Statistics show a dropout of more than 50% by the 5th year of policy. And in a similar time frame, the adoption rate to invest in the share market has increased rapidly.
This dropout percentage indicates that the audience is not willing to wait for a long term investment of 15-20 years to use the lump sum to meet their?goals?especially when short term goals are becoming too short.
Industry requires new products curated specially for the?needs of the audience, especially to meet short term goals.?One?of the possible examples can be?a product curated to meet destination traveling.
What is your opinion on Life Insurance as a short term financial tool?
Will it be a sustainable move for insurance companies? ?????
Management Consultant @Infosys Consulting || CWM? || Google Certified Project Manager || FSI_Banking & Capital Markets Advisory || Ex-Shrarekhan by BNP Paribas || Ex-ICICI || GLIM PGPM 23
10 个月Age, Uncertainty of life and Insurance Premium have a direct relationship, so as the age increases the uncertainty of life also increases, leading to an increase in the policy premium! So it deceives the higher ROI moto of investors! And here am I not considering the short term aspect, which doesn't allow the cumulative interest and market uptrend, to play its vital role!
Risk & Data Strategy || Digital Lending || Shriram Finance Ltd ||Ex-Hindalco(ABG) || MBA@GLIM || BE@NPTI
10 个月Anshul Kumar Singh totally agreed. In the current scenario, individuals while investing think about expected return that too in short term of next 3-5 years while they ignore the basic need of having life insurance. As per their needs, short term insurance product which gives return in the short term while also giving insurance on unexpected events in the timeframe is the kind of product expected in the market.