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Life insurance is the most preferred investment option for Indians news
19 January 2009

According to the recently conducted Nielsen Life 2008 survey, Life Insurance has the highest
penetration levels amongst investment options with 44 per cent preference, followed by bank fixed deposits at 35 per cent.

Gold at 33 per cent and property with prefernece levls of 23 per cent are the other favourites among Indians.

The current financial turmoil makes it a tough case for equity markets.

Nielsen Life 2008 is a syndicated study that provides insurers an understanding of the overall Indian insurance market. It gauges awareness, perceptions, concerns, motivators / barriers, satisfaction levels and usage towards insurance among retail consumers.

''The Indian insurance market is buoyant since its opening up," says Kalyan Karmakar, associate director, consumer research, The Nielsen Company.
 
Karmakar says, "It is interesting to note that in the beginning of the year 2000 there was only one player in the insurance sector but today we have 22 players with varied offerings. Insurance buyers have responded positively to this with a rising number of buyers looking at private players for their second policies.,

Future intention to invest Again, Life Insurance topped the list of future investment instruments with 30 percent respondents agreeing to consider it as a future investment option, followed by bank fixed deposits (11 per cent), gold and property (both 7 per cent), and life insurance child plans (6 per cent).

''In the wake of the global financial meltdown, most investors are looking at options, which help them safeguard their capital. Life insurance is seen to be one such avenue'' Karmakar points out.

The three key triggers for buying life insurance are family protection in case of untimely death, retirement corpus and securing child's future. Interestingly insurance for child emerged as a key
trigger compared to the previous leg of the survey in 2004. Tax exemption as a trigger to purchase insurance has dropped significantly compared to 2004.

''We see a reduction in the number of people who bought insurance for tax saving with more people buying insurance for insurance sake!'', said Karmakar.

''We have seen a sea of change in the insurance marketing landscape in recent years. Increase in the number of players, significant spikes in media spends, growing focus on instruments like Unit Linked Insurance Plans (ULIPs) and expanding channels such as Bancassurance have led to high noise levels and clutter in the market. Yet, the role of the agent or insurance advisor remains paramount while closing sales'', continued Karmakar.

  • For 98 per cent of the Nielsen survey respondents, agents are the main source of information on insurance policies.
  • Friends and peer group emerge as a significant source of information (58 per cent).
  • Media also plays an important role in spreading awareness about various insurance policies, which includes
    • television advertisements: 55 per cent
    •  newspapers: 35 per cent and 
    • outdoor hoardings: 33 per cent

Karmakar says, ''The boost in media activities in the last four years has helped insurance companies create awareness about their products. Today there is ample information about the various financial products available in the market and people have more clarity about them. Peer groups are also discussing more about finance today than they were doing a couple of years back. All this is acting as a major influence in the final decision-making of consumers'', said Karmakar.

The world of private insurers
There appears to be a consumer divide between private and public players where insurance is
considered.

While most customers chose the state owned, LIC, for their first insurance policy, there is a strong tendency to look at private players for subsequent policies.

Private players are seen to provide additional investment options and are considered more transparent. The door step service provided by them is preferred by respondents. On the flip side, the high charges and hidden costs of private insurance companies act as a deterrent for respondents.

Respondents think that private players are new in business, thus this is often a barrier for a long term commitment. They also score low on providing better product portfolio and services.

Change in insurance policies sought, with changing stages in life
The survey also found that respondents in their spending years (average age 32 years) had a greater knowledge about, and exposure to ULIPs and equity investments than other consumer segments.

The respondents in their Responsible years (average age 35 years) displayed the highest insurance penetration - again topped by traditional insurance, and had higher awareness and penetration for Child plans. In the Settlement years (average age 41 years), along with insurance, high penetration was seen in gold and property.

The least insurance penetration was seen for respondents in Worried years, who have high penetration levels in gold, bank FDs and post office savings.

Interestingly, awareness of ULIPs was significantly lower than that of endowment, money back, child plans and term plans. This was despite the high proportion of ULIP sales in the recent past.

''Customers often buy policies without knowing that they are 'ULIPs'. To them the purpose of the policy - life protection, investment, child plan, retirement planning - gains precedence over the investment mechanism of the policy. 'ULIP' awareness is further clouded by low levels of equity participation by Indian customers. We expect ULIP awareness levels to go up as the market matures'', Karmakar explains.


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Life insurance is the most preferred investment option for Indians