K C Mishra
The high and the mighty are not protected
Declining ownership of life insurance in lower middle-income India is often attributed in part to the belief that active insurance agents neglect this market.
Part of the customary prescription for solving this challenge is to direct agents towards this market, in the belief that the high net-worth (HNW) market is already saturated when it comes to life insurance.
However, research shows that the high net worth market is still significantly under-penetrated.
More than half of HNW households, defined as Rs 10 lakh or more in net worth, not including primary residence, do not own any whole life or term insurance product. These numbers have not changed significantly over the IRDA years.
A full 42% of those who own individual life insurance do not have enough insurance for their needs.
This number is likely an underestimate, as 26% of these HNW millionaires indicate they have less than Rs 1 lakh of individual life insurance, and more than 62% report having less than Rs 5 lakh of individual life insurance coverage.
Today, it is nearly impossible to avoid seeing articles in press regarding the increasing old generation with or without pension benefits. However, most treat this vast segment as an undifferentiated mass.
To better understand the dynamics of this market, break the old down into both “storming” and “forming” generations and also analyse them against the HNW generations that both preceded and followed them as silent generation and GenNext respectively.
The HNW groups compared were:
Silent generation (born before 1921, the Gandhian non-cooperation year);
Roaring generation (born between 1921 and 1947);
Forming generation (born between 1947 and 1964, the Nehruvian generation); and
“GenNext” (born 1965 or later). While 44% of all HNW households own life insurance, ownership is significantly lower in the Silent Generation (31%) and significantly higher among the GenNext (53%).
Pensioners, and especially forming generation citizens are the most likely to own endowment, while endowment was least likely to be owned among members of the Silent Generation. There were no differences among the generations in terms of whole life ownership.
Insurance penetration and density are quantum indicators but not quality indicators. If the penetration is improving, insurance is assuming greater importance in the economy. If the density is improving, individuals are allocating more of their wallet for insurance.
But insurance is as much about spread across term insurance, whole life insurance, endowment insurance and universal insurance etc. in one way and spread across various risk groups classified according to demographics like age, income, sex, wealth and geography etc.
In absence of a “Basic Insurance Return” or BIR type collation, insurance regulator cannot assess quality robustness of the market. Somehow banking sector has worked with Basic Statistical return or BSR for ages.
It is intriguing to note why insurance sector never bothered for such information architecture working under same government department, particularly when insurance business rests entirely on interpretations of data.
(The writer is director, National Insurance Academy, Pune)
