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15 January 2009
Mumbai, India
The vast array of investment options available in the Indian market today is an indicator of the robust growth the market is experiencing. As the different financial categories jostle to win consumers’ confidence and trust, life insurance still reigns as the preferred investment instrument, latest findings from The Nielsen Company shows.
According to the recently conducted Nielsen Life 2008 survey, Life Insurance has the highest penetration levels amongst investment options with 44 percent, followed by Bank Fixed Deposits which has 35 percent votes. Gold (33%) and Property (23%) are the other favourites among locals. The current financial turmoil makes it a tough case for equity markets.
Nielsen Life 2008 is a syndicated study to provide insurance players 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. 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”, said Kalyan Karmakar, Associate Director, Consumer Research, The Nielsen Company.
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%), Gold and Property (both 7%), and Life Insurance Child Plans (6%).
“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” continued Karmakar.
The insurance category
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.
Marketing channels
“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 percent respondents, Agents are the main source of information on insurance policies. Friends/ peer group emerge as a significant source of information (58%) in comparison to 2004. Media also plays an important role in spreading awareness about various insurance policies, which includes Television Advertisements (55%), Newspapers (35%), and Outdoor Hoardings (33%).
“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 players
There appears to be a consumer divide between private and public players where insurance is considered. Most customers chose the state owned, LIC, for their first insurance policy. However 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 Lifestages
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.
ULIPs - the new star?
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”, continued Karmakar.
About Nielsen Life 2008
Nielsen Life 2008 is a Usage and Attitude study specifically for the insurance sector. It gauges consumer awareness, perceptions, concerns, motivators/barriers, satisfaction levels and usage towards insurance among retail consumers. Working men and women from SEC A, B, and C in the age group 22-50 years were interviewed. The study involved 12,760 respondents.
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in New York, USA. For more information, please visit, www.nielsen.com
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