COPING WITH RISING PREMIUMS

It is not just health insurance premiums that are rising on the back of Covid. Even life insurance premiums are on the rise.

- Narayan Krishnamurthy

Insurance advertising mostly revolves around a morbid setting or showcases a situation where the target audience visualises the financial pain they would face in the absence of insurance. This approach works because of people's loss aversion bias. In the case of life insurance, family members are shown thanking their loved ones who left them financially secure. The fear of death and disease have made both life and health insurance sales spike in the past two years because of the ongoing pandemic.

No doubt life and health insurance are essential, but one should consider the extent of cover one actually needs. One should also find the kind of policy that would best help them or their dependants when the benefits come into play in a hassle-free manner. There is a cost the policyholder pays by way of premiums and there is a scope of cover defined in the policy document that details what the policy would pay for under specific conditions.

Now, think of insurance as a bet one would love to lose and be happy to pay the premium to keep the bet on. Further, loss-aversion makes one commit to insurance plans even if some of the losses outlined in the plans are unlikely to occur. For instance, imagine a health insurance that pays for 28 different types of surgeries. Very few policyholders may claim such benefits beyond a second or third time. Insurance companies are guaranteed business as they manage to strike a chord with policyholders about the need for financial security.

INCREASING INSURANCE COST