T H E B E ST OF INSURANCE BIGGER LIFE COVER, LOWER PRICE

It's more important than buying the right stock or investing in the best mutual fund. And it's more useful than any other investment in your portfolio. Yet, many Indians continue to buy insurance for the wrong reasons. Insurance is the lynchpin that keeps your financial plan steady even if unforeseen events threaten to derail it. This is why ET Wealth covered life and general insurance in detail, telling readers about the benefits of taking cover against risk, guiding them on the best ways to insure themselves and cautioning them against mis-selling by unscrupulous agents. Advice on life insurance would have been incomplete without talking about eschewing unsuitable policies or ensuring that a claim is not rejected. We also tracked the changes in the health insurance landscape as also the possible impact of portability.

    It's that time of the year when showrooms try to get rid of merchandise that may not find buyers till next year. So, something far more precious than off-season apparel and household appliances is being sold at unbelievably low prices. Term plans, which are seldom pushed by agents, but are arguably the best form of insurance, are being sold at premiums 40-50% lower than those offered 1-2 years ago. 
    Much of this has to do with the growing competition in insurance. Some of the newer players, desperate to get a toehold in the market, are offering lower premium rates to attract customers. They are encouraged, in part, by the improving life expectancy figures in the country. The average Indian now lives for almost 65 years, compared to about 55 years in the 1980s and 58 years in the 1990s. 
    There is more good news. Online term plans, where a customer buys the policy directly from the company, are up to 35% cheaper. By removing the intermediary between the customer and the company, the Internet has helped bring down the price of the cover. Says Madhivanan B, executive director, ICICI Prudential Life Insurance: "The online channel lowers the costs of processing and servicing, which we pass on to customers." 
    Online term plans have become a huge hit with buyers. Every 18 minutes, an online term plan is bought in the country. In the past six months, the seven life insurance companies that offer such term plans have issued more than 14,500 policies with a combined cover of roughly 9,100 crore. This is almost equal to the total cover offered by all new policies sold by the newest five life insurance companies (Star Union Dai-ichi, Shriram Life, IndiaFirst, DLF Pramerica and Sahara Life) in 2010-11. 
    The large cover offered by online plans is good news for an underinsured country like India. The average life insurance policy - issued in 2010-11 offered a cover of 1.93 lakh. 
    — ETW, December 20, 2010