Term plans find traction with money back feature

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Chennai: Term plans, where you get zilch if you outlive the policy tenure, are finally seeing some traction after insurers have tweaked the plans by adding a return of premium feature.
Unlike in the popular endowment plan where one gets back the sum insured along with accrued bonus at the tenure end, in a term plan the survivor loses the entire premium paid. This was concern for return-conscious customers. To address this concern, insurance companies have in recent times come up with attractive Term with Return of Premium Plans, or TROP, as an additional benefit.
Term plans with this feature provide the insured the benefits of term insurance and return of the premiums paid on completion of the policy term as a survival benefit.
“In a survey we had done sometime back, we found that many customers were not keen on term plans because they saw it as a sunken investment in case they outlived the tenure. Considering such customers, we offered the TROP feature and we have seen good off-take of such plans,” said Aalok Bhan, Director & Chief Marketing Officer of Max Life Insurance.
Max Life Insurance has seen an increase in TROP sales and over half the customer base now wants to buy term products with TROP benefits. Currently, TROP has around 60 per cent share in the overall Smart Term Plan sales. Whereas in terms of protection plans (STP+Online Term Plan), TROP has more than 40 per cent share of the total policies sold.
“While the TROP feature was there earlier, the pricing was not attractive. Tata AIA Life started offering TROP plan with an attractive pricing and then some of the other life insurers also started offering it. Among the term plans of different insurers we sell, if TROP had a share of 4 to 5 per cent last year, now it has gone up to 12 to 15 per cent,’ said Santosh Agarwal, Chief Business Officer- Life Insurance, Policybazaar.com.
According to her, pricing has also become attractive for TROP. Earlier, the premiums of TROP plans were 2X of vanilla term plan but now they are available for 1.2X and 1.5X of term plans. The lower GST too has helped in pricing the product rightly, she said.
According to Bhan, TROP is more popular among middle-income group customers who are return-conscious. As insurance companies have been aggressively pushing term plans, TROP has helped them widen the market.