(This story originally appeared in on Jul 17, 2020)MUMBAI: Middle-class Indians, who were until last year worried about savings for their children’s education or marriage, are now more concerned about immediate health expenditure or loss of income following a pink slip at the workplace.
There has been a dramatic change in risk perceptions since Covid-19 struck. Many of the concerns that were top of the mind for most last year have dropped off their lists as people have bigger things to worry about because of the ongoing coronavirus pandemic.
A survey conducted by consulting firm Kantar on behalf of Max Life Insurance shows that the current level of financial security was the lowest in metros (46%), while it was the highest in tier-2 centres (55%), followed by tier-1 cities (52%). Up to 64% respondents in metros said that security of job/current business/stable income is more of a worry to them now than before Covid-19, but only 51% in tier-1 said it had become more concerning to them.
“While people are now saving half their income, the concerns are more short-term. The concerns are here and now and not long-term,” said Max Life Insurance MD and CEO Prashant Tripathy. The top three objectives for savings in the post-Covid-19 world are for coronavirus treatment, for medical emergencies, and keeping aside money for loss of job or business. Kids’ education, old age security, buying a house, kids’ marriage, travel and buying a car have moved down the list.
In the wake of the current situation, the survey brought to light that, in comparison to pre-Covid-19 times, consumers are saving more now, whereas investments and basic expenses have remained the same as before. While savings increased for 48% respondents in tier-1 and 38% respondents in metros, investments remained the same as before Covid-19 for 44% in tier-1 and 40% in metros.
Typically, uncertainty increases the demand for insurance. But this time, the impact is mixed as people are not really thinking about retirement and are not confident enough about their income stability to make commitments for future payments. According to Tripathy, there is demand for term life insurance, which takes care of the fear of loss of the breadwinner. “One of the barriers to buying term insurance is a misconception that it is very expensive, which is not correct,” said Tripathy.
According to Tripathy, Max Life has seen around 35 claims on account of Covid. “The trend is that there is an overall decline in death claims as accidental deaths are down because of the lockdown,” said Tripathy. He added that while policy renewals did get impacted due to the lockdown in April, subsequent months have seen an improvement in renewals. He also said that the company had not seen any trend of policyholders trying to encash their unit-linked policies following the pandemic.