Wealth Guide: National Insurance Awareness Day 2022: Significance, importance of 'Financial Security' - Expert explains

National Insurance Awareness Day 2022: Protection, safety, security, have become more synonymous and significant than ever before. Their importance has been underlined in the recent past. While we take multiple measures to ensure our and our family’s good health and well-being, unfortunate circumstances often come unannounced. Many a times we are completely unprepared for the same. We must consider scenarios beyond our control, be it a health emergency, (like this pandemic), a natural calamity, (which now a days hits the same place more than once a year), or an accident. If you view it from a wholistic vantage point, it is important to secure your health, home, vehicle, property or anything that you value and the best way to do the same is through insurance. The more foresight and planning we can undertake, the better prepared we will be to mitigate these challenges at very minimal costs. On National Insurance Awareness Day 2022, Anand Pejawar, Deputy Managing Director, SBI General Insurance, shares his knowledge on insurance and explains the significance, importance of 'Financial Security'.

"There are multiple avenues to build one’s financial health. One may choose to invest in Bank / Post Office deposits, mutual funds, invest in the stocks/property market, gold investments, Real Estate or buy insurance policies. Of all these avenues available, insurance policies provide you with financial stability, and security in the face of adversities. Over and above the same health insurance also offers the added benefit of tax savings. The current pandemic has already shown us how these factors, which are beyond one’s control, can cause a double whammy by impacting one’s financial condition and causing further harm on the financial front at the same time causing huge impact on one’s health too," Anand Pejawar said.

Insurance, its awareness and reach

"While the past two years have definitely provided a boost to insurance awareness, overall Insurance penetration levels and more so in non-Life insurance sector are still quite low in the country. (Penetration rate is measured as the ratio of underwritten premium to GDP). General insurance penetration was around 1% in FY 21 (as per Swiss Re data), however, the world average of 4.1% indicates that there is a large majority yet to be insured and secured. The country has already seen such instances and how the common man has suffered due to underinsurance. The Chennai floods, J&K Floods, Uttarakhand Floods, Cyclones hitting Konkan, Odisha belt year after year, etc. The gap between the economic losses suffered and the Insurance claims received were huge, thereby clearly indicating this large protection gap. The reason behind this are multifold:

· Knowledge & Understanding issue: Larger part of the population find insurance a difficult subject to fathom

· Distribution type & reach: They rely on one-on-one interactions with intermediaries to simplify the concept for them

· Considering it a waste of money: Some also feel that placing their money in insurance is not beneficial if they do not claim

· Reach & accessibility: A huge part of India also does not have ready access to insurance related information on products

While it is important to simplify the concepts of insurance, it is also essential to explain the significance, its features, advantages and benefits to people. Common man should be able to understand the real benefit of insurance in simple terms. Insurance awareness can be driven through:

· Simplifying Insurance – Both information on insurance and insurance products / solutions needs to be simplified keeping the urban and rural populace in mind

· Conducting awareness programmes by insurers – Awareness programmes / drives through comprehensible channels / formats for the diverse demography of the country is essential.

Insurers must talk to the end consumer through digital engagement channels, information portals, simple and local “Nukkad Nataks”, or simple conversations but we must talk to them in the language they know & understand.

· Proper training and increasing the reach of Intermediaries – Since there is a high dependency and trust on intermediaries for knowledge & information on insurance, the intermediaries must be adequately trained (both products & process knowledge, including soft skills) to bridge this gap. A strong network of intermediaries in semi-urban and rural areas will also go a long way in spreading awareness and penetration

· Using of technology to increase reach – While it is easier to reach the urban customer through various channels of communication, technology must be leveraged and simplified to reach the rural customer as well. With the reach of 4G technology in rural India this is now easily possible," Pejawar added.

He further explains, "There are different kinds of insurance that secure various aspects of people’s lives like:

Health Insurance

Investing in a reliable health insurance plan ensures that you are prepared to the best of your ability, financially, to meet any unforeseen health emergency. It enables you to choose quality medical treatment without having to worry about medical charges. Almost all health insurance plans cover your entire family, (family Floaters feature), hence instead of opting for separate policies for each household individual, you may even choose a family floater policy, which is more beneficial

Motor Insurance

Motor insurance is mandatory for all vehicle owners under the provisions of the Motor Vehicles Act 1988. This policy protects you from financial liabilities both for own damage of your vehicle as well as from a third-party incident happening. In the event, that someone is unfortunately injured, or third-party property may be damaged, this plan covers the financial cost.

It is always advisable top opt for a comprehensive plan wherein you receive coverage for damages due to accidents, fire, and even theft. There are several add-ons, which one can choose from, such as roadside assistance which you can use to request help in the event of a vehicle breakdown.

Travel Insurance

A comprehensive travel insurance plan will protect you from any sudden contingencies (travel, medical or otherwise) and is especially helpful if you are traveling internationally. This will take care of the expensive medical bills you may need to pay abroad. It also protects you from other risks during travel such as loss of check-in baggage, loss of passport, missing connecting flights, hotel bookings, etc. It’s always a good option to get your Comprehensive Overseas Travel policy issued in India so that you can travel safely and without any tensions of any losses.

Home Insurance

Home insurance offers you financial security in the unfortunate event of your home may be damaged due to any external factor. Under various plans available, members of your family along with the contents of your home, electronic items, and jewellery, etc. are covered. To safeguard your home, paying a small annual premium to ensure its safety and security is ideal to protect it against any unforeseen contingencies."

He further explains, "Beyond these, there are multiple other policies that cover other valuable things. Due to pandemic schools were closed, children studying from home. Most of the people were working from home (WFH). The use of internet and WiFi was at its peak. Currently, almost all your monetary transactions are carried out from your mobile. This has led to increased number of cyber frauds; hence a good Cyber insurance can be handy. Similarly, there are insurance policies for Rural sector – like farmers can insure their crops, cattle, tractors, farm equipment. Shopkeepers can insure their shop, artisans can insure their tools and equipment, etc.  In fact, to put it simply, you name the asset which is important to you and there is an insurance policy to take care of its protection, safety and security."

"Insurance is the first step to building a strong foundation for your financial stability & security. As our experiences from the last few years have taught us, it is of paramount importance to undertake stringent financial planning to ensure your finances do not crumble under the intense pressure of any events. In today’s world, INSURANCE should be an important part of your overall financial investment portfolio. This insurance awareness day, understand the importance of insurance, read on why insurance is needed and how it can help in safeguarding your and your family’s assets and future. Before choosing any insurance plan, understand the features of the plan, what advantages you can get out of the features and what are the benefits you could derive from the same, in case of the eventuality. Once you are convinced that the plan chosen can take care of your “NEEDS” / “Requirements” and only then choose a right insurance policy which will give you the much required “Peace of mind” in all circumstances. So, choose wisely and make an informed decision today," he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)