The average ticket-size in life insurance policies has jumped almost 20 per cent for individual policies in the last three years. Life insurance companies have seen the average ticket size rise to Rs 40,000.
With the sum assured in policies going up, the subsequent premiums for the products are also going up.
Deepak Mittal, managing director and chief executive officer, Edelweiss Tokio Life Insurance, said, the portfolio average premium for individual policies was around Rs 40,000 and the average ticket size was growing at a compounded annual growth rate of about 19 per cent for them.
The increase has occurred in both offline as well as online plans.
Mittal said for online products, one of the key reasons for increase in ticket size was increased need of higher protection. He added for offline products, an increased effort on need-based sales resulted in higher sum assured and higher ticket size.
In the past, there had been heavy discounting in the online insurance space leading to premiums dropping to about Rs 6,500-Rs 7,000 on an annual basis.
Intense competition in the online term space,had seen prices take a slump, but they have since recovered.
Insurance company executives said apart from the product premium, the features were also being looked into by policyholders before any purchase.
Karthik Raman, chief marketing officer and head, strategy and products, IDBI Federal Life Insurance, said their average ticket size was Rs 47,000 from new business premiums for individual business.
He said it had grown by a compounded rate of about 20 per cent in the past three years.
“With inflation, the amounts needed to meet important goals such as education or retirement had increased many folds. The increased tax savings limit to Rs 1,50,000 under Section 80 C combined with increasing incomes has aided in this increase,” said Raman. The type of products also plays a role in the average ticket size.
Srinivasan Parthasarathy, senior executive vice-president, chief and appointed actuary, HDFC Life, said for guaranteed savings products, the average ticket size was around Rs 63,000.
He added this was primarily because of long-term guarantees offered in the plan. “It comes as an attractive proposition to the customer given the downward trend in the long-term interest rate scenario.”
The unit-linked insurance product (Ulip) portfolio of companies generally had a higher ticket size since these were investment products and customers were not risk averse. The ticket sizes ranged from Rs 50,000-60,000 for these products.
Life insurers are now focused on need-based selling across all products.
Parthasarathy said the average ticket size had gone up with the adoption of need-based selling methodology.
"We have created various sales tools/calculators like retirement planner, human life value, child education planner which help the customer to better project his or her financial needs 10-15 years down the line considering the impact of inflation and future interest rates thereby educating customer to analyze the gap that may arise with the current savings pattern," he said.
The number of riders being opted by customers are also going up, leading to an increase in the sum assured for the insurers.
Khalid Ahmad, Head-Product Management, PNB MetLife India said that last year, they launched their first online term plan MetLife Mera Term Plan. "We have seen an increase in the average ticket size of the policy by 20 per cent from January 2016 to September 2016. We have also seen an increase in the Average Sum Assured from Rs 94 lakh in January 2016 to Rs 1.15 crore in September 2016. This has largely been due to a high rider uptake from the customers," he said.
Until last year, the term plan market was predominantly a lump sum cover market. However, Ahmad said that they are seeing a change in this pattern, with 66 per cent of their policies have been attached with atleast one rider and 58 per cent of the policies have atleast two riders attached.
Overall disposable income increase has also contributed to the rise in sum assured. Manoranjan Sahoo, chief agency officer, Reliance Life Insurance said that the main factors that have contributed to the increase in average ticker size for the industry are higher percentage of Ulip sale, higher sum assured sale, less term of the policies among others.