“It is a painstaking exercise. We reach out only after a few days of death when the family would be possibly less traumatised,” an official connected with the exercise said.
The aim is to use the pandemic to gather data on what percentage of the deceased had a life policy, that too typically a term insurance. It is also meant to be a sample data about the percentage of those who do not have such policies and have seen their breadwinner die. It will provide the government an alternative assessment of the extent of financial support needed by different income groups to recover from the ravages of Covid-19.
Of the 1,568 recorded deaths till May 3, the teams have managed to reach over 500 across the country. Another 100 is being reached out to via sms . As expected, the percentage of life cover was higher for the first hundred or so casualties and has begun to decline rapidly since then. The total number with a life cover has barely touched 100 so far.
“The first cases were of those who had gone abroad or their contacts (had). You would expect that they would be from the high-income groups and so would have a life policy.”
The exercise is quite a departure for any of the arms of the finance ministry, which rarely commissions data-based exercises to determine policies, preferring instead to hold dialogue with the stakeholders.
As the numbers decline, it is validating the concern among insurance specialists about how limited is the reach of any social security cover among Indians.
The Insurance Regulatory and Development Authority of India (Irdai) data shows life insurance penetration (measured as the percentage of insurance premium to GDP) is only 2.7 per cent. Even including non-life insurance, it is just 3.7 per cent — lower than comparable Asian nations like China and Malaysia or other developing countries like Brazil. It is far lower than the rates of 11.6 per cent in South Korea or 9.6 per cent in the United States.
Life insurance is often the only cover middle- and lower-income Indians buy as a means to offer family security.
The Irdai data also shows the popularity of life insurance among Indians had gone up steadily in the first decade of this century, rising to 4.60 per cent by 2009. But thereafter it has dipped and stood at 2.74 per cent by 2018.
Since Indians buy cheaper life insurance products because of low per capita income, what is more of a concern is that they are buying less of those. In the financial year 2018-19 (FY19) the 24 life companies issued 28.6 million new individual policies, out of which LIC’s share was 21.4 million.
However, experts believe that after the pandemic, the popularity of life insurance will expand rapidly among the people.
A Goldman Sachs research paper “investing in 2020 and beyond” marks insurance as one of the sectors that could do well coming out of the impact of the pandemic. The current exercise could help figure out how the lower-income groups could particularly benefit.