SwissRE Survey Shows India's Insurance Demands

Posted on Aug 05, 2011 by Sergio Ulloa (G+)

India's next generation of consumers are growing increasingly aware of the benefits of insurance and will be more willing than ever to purchase cost-effective policies, according to survey results released this week by Swiss Re, the world's second largest reinsurance company. The "Survey of Risk Appetite and Insurance: Asia-Pacific 2011" was commissioned by Swiss Re to identify and examine changes in regional consumer risk attitudes since the firm's first study was held during the global financial crisis in 2009. Between April and May 2011, 13,800 consumers aged between 20 to 40 years old (Generation X and Y) were surveyed across major cities from 11 different countries in the Asia Pacific region. Data on India's insurance needs and buying behaviors were compiled through 2,000 individual face-to-face interviews with consumers in Delhi, Mumbai and Bangalore. Once the data was collected, country scores were tabulated using Swiss Re's in-house metric, the Consumer Appetite for Risk Index (CAFRI). CAFRI calculates the overall level of risk appetite within a specific population by consolidating their risk attitudes based on consumer responses to four key factors: health, finance, career and lifestyle. The CAFRI has a range from 0 to 100, and the higher the index value the more willing a given population is to take on risks. A score of 50 equates to a risk neutral country. With a final CAFRI score of 39.4, India ranked in at 7th in the country table, behind the developed markets of Japan, Hong Kong, Australia, Singapore, South Korea and Taiwan. While the combined CAFRI number may indicate that the average consumer in India remains more risk adverse than many of its neighbors, breaking down the response to risk aspects individually reveals the dynamism present in the Indian market. Across the 4 key response categories, Indian consumers indicated that they were very fearful of risk involving finance and career security (ranking tenth and ninth of 11), neutral on health costs (seventh), but the most confident in the region with lifestyle associated risk (first). This last category alone enabled them to lead all the surveyed countries from emerging Asia (China, Malaysia, Vietnam, and Indonesia) in consumer risk appetite, Amit Kalra, Swiss Re's Head of Economic Research & Consulting India, wrote in India's country report that the respondents' eclectic mix of risk priorities demonstrated the unique qualities and challenges present in the Indian insurance market. "Across Asia Pacific, the 20 to 40 year olds in India are the most willing to take risks in their lifestyle, such as pursuing dangerous sports, working for long hours, and living in the present without caring about the future. But they continue to be among the least willing to take risks on their career (9th) and finance (10th). For instance, 83 percent of respondents still consider capital preservation as their top priority in making an investment. This proportion is the highest in the region," Karla remarked. This endemic savings-based culture is slowly changing however as escalating healthcare costs encourage more Indians to now invest in the market and consider insurance coverage. According to the survey, 71 percent of all respondents in India worried about the inability to pay out-of-pocket medical expenses in the event of a major long-term illness, injury or the threat of passing on debts due to early death. The study also found that 70 percent of those polled wouldn't be able to keep up with rising premiums in the future. Both percentages were higher than the recorded Asia Pacific averages of 67 percent and 58 percent respectively. Consistent with this noteworthy protection need, a remarkable 78 percent of Indian respondents told Swiss Re they were planning to take out a life or health insurance policy within the next 12 months, the highest ratio in the Asia Pacific region alongside Indonesia. Medical bills and financial risk are fueling the need for insurance and innovative financial planning. When asked what was stopping Indians from buying any insurance right now, 42 percent responded that high prices were the issue. However, when the subjects were presented with several modern life insurance products, many admitted that they were in fact affordable and within the price range they were willing to pay. Indeed, 81 percent indicated that they would pay at or above market value for a specified term life insurance cover. A lack of awareness about long-term medical cover, whereby premiums are locked in against inflation for multiple years, has prevented similar positive response for health insurance. To further encourage the purchase of insurance in India, work needs to be done to overcome this perceived cost barrier. Amit Kalra commented that this disconnect needed to be corrected because insurance in India is not as expensive as the people may perceive. "More education is needed to ensure consumers understand the value of protection insurance against the price they pay," he wrote. According to the survey, for these Indian consumers aged 20 to 40, their premier source of education about personal finance and investment is television, with a 71 percent response (highest proportion in region) followed by agents and newspapers. When it comes time to actually making a purchase, traditional agents have remained the dominant channel for buying life and health insurance, with 89 percent of the vote, followed then by banks and finally independent financial advisers. Swiss Re's research revealed what the insurers need to do themselves to attract the next generation of consumer in India. According to the survey, the most important criterion for Indians when choosing an insurance company is value for money (with 55 percent preferred), followed by a good reputation (52 percent) and finally financial accuracy (42 percent). The respondents also expressed concern that insurers tend to oversell their investment products versus protection plans and that individual customer customization and service was sorely lacking. "Insurers must demonstrate the benefits of insurance and their strong value propositions in order to meet the specific needs of consumers, who put strong emphasis on value, reputation and financial soundness," Kalra concluded. Companies Mentioned Swiss Re Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines - such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.