Term Insurance: When & Why | m.Stock

Insurance I think 99% of the people will know what it is but then the same percent will say within our country it is the uh the pricing is still cheapest considering the longevity that we have versus the developed countries. Our prices are much cheaper even from the developed countries as far as term plan is concerned. The other yardstick which I have is this is a risk mitigation product, it's not an investment product. In case there is immense wealth within the family then you don't need a term. Similarly, as an individual, when you are starting off, you should have a term. The ideal piece is I have bought a term plan, but I've also started preparing for this corpus.

Vivek: 
Hello everyone and welcome to another episode of Bazaar & Beyond, where we deep dive into the world of finance, investment, and more to help you make smart investment decisions. Our co-host Vivek Anand, and today’s guest is Satishwar B, the MD and CEO of Bandhan Life Insurance. Mr. Satishwar is a chartered accountant who started his career in 2000 at ICICI Prudential. After stints at Reliance Life Insurance and India First Life Insurance, he now heads Bandhan Life. Thank you, Mr. Satishwar, for joining us. 

Vivek: 
I wanted to start off with your journey. You qualified as a CA in the late '90s. You entered the insurance industry in the early 2000s. How has your journey been after qualifying CA and then now heading Bandhan Life Insurance? 

Satishwar: 
First of all, thank you for having me here. It's a little bit of nostalgia here actually. So, ’98 is when I gave my exams and ’99, the results came out. So ’99 is when I actually became a chartered accountant. I continued with the typical CA articleship for a while and then 2000 is when the insurance industry opened up. So sunrise industry, right lots of opportunities and my very first job was ICICI Prudential. In fact, there were only two companies which started up in the private space HDFC Life and Prudential. In fact, I joined them even before we got the R1 license, okay, so the whole process and everything. 

So yes, as far as my actual work experience goes, it’s only the life insurance industry. It’s been a wonderful journey. I’ve been able to see that whole transition from quite a few things which happened let it be new products which came into existence, for example, say unit link, which started only after privatization, right? Or the innovations which happened in processes. So, over the 25 years, a lot has changed especially the product, the way they have emerged, the process of selling, it's becoming much more convenient and easy to buy and understand a life insurance product. Awareness has been created, but having said that, have we achieved it fully? Not yet. The awareness still is something which we need to work upon. There’s a huge gap there. 

The very fact that it continues to be a push product, right? It still needs intermediation. When I say intermediation, not from a business perspective, but you need somebody to explain the product both in terms of why you need it and which one you need. That still continues. Awareness is something we as an industry are also trying to work upon. A lot has happened in terms of the entire backend, the way you process it, the innovation in the form of products, and the regulation which has now much more stabilized because we were all learning the entire space was learning. 

The benefit of starting in the very beginning of the career itself this was my more or less my first job is that you are learning with everybody in that organization. Insurance was new for the private sector, so all the way from the MD & CEO till an entry-level accounts guy, each one of us were trying to understand the insurance business. Especially coming from a finance background, I was trying to understand how does a life insurance company actually make money? It’s a complicated business because it’s a period where you commit for a longer tenure a policy which runs for a number of years. So there is an initial cost of acquisition and it runs over the period, and then you start making money there. 

Initial days, one of the things that used to happen we also had a foreign partner in the very first company ICICI Prudential where we were working and one of the lines which I still remember and which still continues is basically a line which said, “The more you sell, the more are your losses.” Okay, so that was kind of a surprise because normally you will not sell at a price which is lesser than the cost. That learning itself was building the thing is basically you can’t see it as a product which you sell and immediately start making money. The product itself takes some time; you start making money at a later part of the year. The renewal stream which comes in that’s where the profits emerge. Otherwise, to get the customer onboarded, especially considering it’s a push product, you need somebody to explain the products, and that needs a lot of effort. That’s why the cost of acquisition is a little higher. 

And naturally, if you just compare the very first premium with the expenses, then you might see losses coming there, but subsequently you start making money. So that was the biggest learning which still continues. A lot has happened in terms of improving efficiency factors, awareness about the products, innovation in products yes, that has happened, but yes, miles to go. 

Vivek: 
Transition Story – Aegon Life to Bandhan Life Insurance. I think Aegon had sold the life insurance business to Bandhan. That’s why the renaming of the company to Bandhan Life. During this transition, you had to steer the company through a lot of change. Now you’ve set targets and goals for your team how have you been able to connect to the Bandhan Bank ecosystem to expand the business? What are the changes you’ve seen and how quickly do you think you’ll be able to implement them? 

Satishwar: 
In fact, these 25 years that I spoke about one big change happened in 2008 when Aegon came into the picture. Aegon was the pioneer in terms of popularizing the term plan. Term plan is the simplest form of life insurance a pure risk mitigation tool. You pay a small premium, and if something happens to you, the family or nominee gets the payout so that their future is protected. That’s the simplest form of life insurance. 

Before 2008, it was not a major selling product. Aegon actually brought in this whole space in a big way. In fact, if you remember, there was an awesome campaign called “Come Insurance” maybe you’re not from that age group, but it featured Aamir Khan  and that campaign really popularized the concept. Aegon built this whole image of being a major term player. 

That’s how Aegon came into existence with a bang, and it started off pretty well. But over the years, concentration on term and term continuously needs a lot of intermediation plus, it’s a little selective. It continues to be a bit more selective in terms of the customer base. Normally, people with steady income are the ones who understand this risk mitigation piece and look at income replacement. So that base itself was pretty low. As you know, more than two-thirds of the country’s population is self-employed. 

In those years, term was more associated with the salaried customer base. It was seen as replacing your salary in case the policyholder is no longer there. So it was a limited customer segment, and somewhere over the years, it didn’t become big. Aegon couldn’t grow to a great extent. 

In 2024, within the Aegon world, they also had some consolidation happening, and they wanted to exit India and that’s where Bandhan Life came in. I joined Aegon in 2019 because we were trying to do something with a new strategy going fully digital. Earlier, we also had conventional processes, but we envisioned that the next big thing would be digital. That’s where a new management team came in to drive that space. 

Post-COVID, they had some consolidation to do and they exited, and that’s when Bandhan came in. Now, Bandhan’s entry brought bancassurance business that is, distribution through banks. Bandhan Bank is known to cater to middle and lower-income groups, though it serves across segments. That segment becomes accessible through their ecosystem. 

So that’s the transition we consciously moved from “digital-only” to “digital as an enabler.” When I say digital-only, earlier it was seen purely as a platform or D2C business. But in insurance, the process is lengthy digital helps make it efficient and effective. So, digital-only as a platform continues, but now it’s more focused on enabling partners. 

This change, plus the bancassurance channel, plus a new brand recognition that connects better with a larger customer base across the country now we’ve moved beyond the salaried segment, which was more term-focused, to the self-employed segment, which is the larger population in India. So, the entire customer base has opened up. The brand pull has also come in with that, and it’s allowing us to cater to a larger population. 

Vivek: 
Got it. Switching track a little purely from a perspective you had mentioned about first-time buyers of insurance in your previous answer you focus a lot on that because that’s the acquisition part in the life cycle of the product. You spend a lot on that. What are some of the things that you try to focus on in terms of acquiring that customer? Because the first-time buyer is the one who, as you said, it’s a push product you have to convince them. What are the thoughts in your mind, and how do you motivate your team? What strategies do you implement to convince the first-time buyer that this is a product they require — be it term insurance or any other type of life insurance product? 

Satishwar: 
Yeah, so one is the first-time buyer, and the other thing I spoke about earlier was new business. It can be the same customer buying a new product for the first time that’s the upsell part but it’s still new business. 

For the first-time buyer, need analysis is critical. There can be a rule of thumb in terms of a pure risk mitigation product to start with. For example, the first product should ideally be a term plan. Simple to understand and a pure risk mitigating tool. But attached to that are various savings products. 

So, need analysis becomes critical for any new customer base. One is, of course, a term plan is required if there are dependents on you — and typically for other things too. But the other aspect is understanding what the customer is looking for. One angle is protection, the other is creating savings, wealth, and investments. 

Now, if you’re looking for something that requires long-term commitment that’s where insurance comes in. So, what’s your customer’s risk profile? We specifically get into that. 

Let me put it this way: if you’re looking for something long-term, insurance companies are designed to work on such products — 15-year, 30-year, even 40-year commitments. You can even start a term plan at age 18 or 19, all the way till 75 or 85. Similarly, savings products help accumulate wealth for retirement. You can have guaranteed products that run for 30–40 years. 

In a falling market rate scenario, you might want to secure that. Insurance also helps you build a corpus for your kid’s education — for example, I just became a father, and I know my kid will need funding when she’s 15 or 18. So, I need to start creating that corpus now. Insurance helps you focus long-term. 

Even in market-linked instruments, our philosophy is long-term. So, the guidance is always it’s a long-term need you’re catering to, not something you need in the next one or two years. If you need something within two years, this is not the right product. 

There are short-term covers too for example, if you’ve taken a three- or four-year loan, you can cover it through a short-term term plan. Suppose something happens to the policyholder after 15 months the family isn’t burdened with repayment; the insurance company covers it. Those are smaller, risk-mitigating propositions. 

Otherwise, as a retail customer, you’re normally looking at long-term propositions — term plans that cover your earning years, so if something happens, your family is protected from financial burden. Savings products ensure a corpus for your child’s education or your retirement, even if you’re not there. 

There’s also a protection element attached to it if you’re working toward a pension, you need something that stays longer. Regulation plus investment philosophy both support long-term thinking. 

Some people want fixed, guaranteed amounts for them, guaranteed products (18–30 years) work well. Others are okay with market fluctuations they prefer ULIPs. So, it’s not about pushing one product; it’s about understanding the customer — their goal and their risk appetite. 

Vivek: 
In terms of savings products, how people focus on that in the past 3 to 4 years, the popularity of equity has increased. Has that had any kind of impact on how you pitch the products to customers? I mean, in terms of the industry per se, because that is a screaming competition for long-term money. Have you seen any impact? 

Satishwar: 
If you actually study the industry, it’s evident in terms of the product mix that’s being sold. I wouldn’t say it’s just about my pitch or the industry’s pitch — it’s more about customer awareness around this space. 

Now, customers understand the equity space better. Their ability to take on more equity-linked products, which also carry risk, has gone up. The awareness that if I’m committing for 11 or 12 years, I can take that risk — though it’s not guaranteed, I believe in the potential that has definitely increased. 

That’s why you’re seeing a larger share of mark-to-market products within the ULIP segment of the insurance business. But there’s also a specific customer base that still prefers guaranteed products. 

For instance, I was studying somewhere people’s philosophy changes based on what they’ve seen. If you’ve experienced the 2008 crash, your mindset will be different from someone who started investing after 2008 and never saw a market fall. Those who entered later still believe in equities completely, whereas those who saw the earlier crashes tend to balance with guarantees. 

Personally, I saw the 1993–94 crash during my college days. Everyone suddenly jumped into equities thinking it’s quick money and I even saw people lose everything. That experience changes how you view risk. People who’ve lived through such events tend to prefer having some guaranteed component in their portfolio. 

So, based on personal experience and exposure, people decide. Today, we’re seeing more people open to equities and taking calculated risks. That’s why the product mix within life insurance is also evolving more mark-to-market, more ULIPs, while still maintaining space for guarantees. 

Vivek: 
All right. I wanted to ask one question about composite licenses. We’ve been reading a lot about it in the news and trying to understand what would it mean for the end customer? Whether it’s a general insurance product or a life insurance product, how do you see this changing the customer experience? 

Satishwar: 
See, the composite license allows us to club products in a much better way as a manufacturer. For instance, life and health go together. Both are risk mitigation tools in their own way, and they complement each other. 

From a product design perspective, this gives us a much wider canvas to work on. We can design innovative combined products that’s the kind of flexibility composite licensing brings. 

From a customer perspective, this means better-designed, potentially more competitive products. As a manufacturer, because we can design more innovative products, the economies of scale also start working in favor of better pricing. 

For example, a healthy person’s ability to buy term insurance improves. If you’re maintaining your health through a health policy, your longevity goes up. That makes term insurance less risky for the insurer and thus, cheaper for the customer. 

So, both products term and health play a role in supporting each other. Clubbing them can lead to better pricing, more efficiency, and stronger value propositions. But it’s still in the early stages. When we put pen to paper, there are complexities for instance, health isn’t a “level-term” product. 

Vivek: 
What do you mean by a level-term product? 

Satishwar: 
So, for example, when you buy a term plan say a 40-year or 30-year plan you pay the same premium throughout. Even at age 60, you’re paying what you paid at 30. 

But your mortality risk that is, your probability of death increases with age. At 30, the risk is much lower than at 60. But the premium remains constant because the total cost is averaged over the full term. That’s called a level-term plan. 

Whereas in health insurance, premiums can be revised every 3 or 4 years, or even annually. So, when you try to club life and health, you have to account for these differences in structure that’s where the challenge lies. 

Vivek: 
All right. What about Bima Sugam? It was supposed to come by mid of this year, but it’s still in the works. What can a customer expect if that gets implemented in terms of interaction with an insurance advisor or a company like Bandhan? What could change for a customer? Because I kind of feel like it’s like the UPI for insurance, right? A digital stack that brings efficiency from the get-go. Is that what it is? Can you give us a bird’s-eye view of how it might change things? 

Satishwar: 
Yes, that’s a good analogy. Bima Sugam is still under development, but it’s an industry initiative. Both life and non-life insurance companies have come together to create this integrated platform. 

It’s a platform where everything will be connected. For customers, if you have multiple policies across different companies you can view them all in one place. 

As a distributor, instead of creating your own separate platform, you can plug into Bima Sugam and start selling directly through it. 

For insurance companies like us, we can showcase all our products on that same platform. So rather than having multiple one-on-one integrations, everyone plugs into this single ecosystem. 

It’s a democratized tech platform open, standardized, and scalable. For example, a distributor who sells multiple insurers’ products can integrate through that one system. Similarly, insurers won’t need to build multiple tech links. 

Eventually, it will also become a marketplace, where customers can directly compare and buy policies. 

It’s still under works and since it involves over 23 life insurers and 40+ general/health insurers, integration itself is a big task. But once it comes, it’ll really simplify the entire ecosystem for customers, insurers, and distributors. 

Vivek: 
Got it. Last year there was some proposal about changes in surrender value rules for life insurance customers. There was a lot of talk about it. Can you explain for our viewers what these new rules are, what impact was expected on the industry, and what’s the current status? 

Satishwar: 
This came into effect from 1st October 2024. So policies issued before that and after that differ. The policies after 1st October have much higher surrender values. 

Now, surrender value basically means if you’ve been paying premiums for one or two years and want to discontinue the policy, that’s the amount you get back. 

As a life insurer, we commit long-term returns 15, 20, or 30 years and manage those through long-term investments. So when a customer surrenders early, we need to unwind those investments prematurely, often at a loss. 

Earlier, because of that, exit values were low. Now it’s more flexible anywhere between 50–60% of your paid premium can be received, even if you exit in the first year itself. 

That’s a big improvement because emergencies can happen. Life insurance is a long-term commitment, but if something urgent comes up, you should have the flexibility to get some of your money back. 

This regulation was introduced to make exits more customer-friendly. For the industry, yes, it meant revisiting investment strategies and ALM (asset-liability management), but it’s now aligned and working well. 

Vivek: 
All right sir, I did a little research about some of your plans and micro insurance is one of the focus areas to democratize insurance beyond tier-one cities. I’ve heard of this term before, but how can micro insurance work in life insurance? Isn’t it more common in general insurance products? 

Satishwar: 
No, actually micro insurance which we also call a credit life product works very well in life insurance too. In simple terms, it’s a life cover attached to a loan. 

So, if during the loan period the borrower unfortunately passes away, the family isn’t burdened with repayment the insurance covers it. That’s a loan cover, and it’s already an established product. It works wonderfully well and has been one of the key contributors in life insurance. 

Now, we’re trying to go a step further and design a retail product within the micro-insurance space something that provides flexibility for people with irregular incomes. Because in that segment, the income stream isn’t consistent you don’t get a fixed amount every month. 

So, we’re working on a product that’s a savings product with a life cover, offering flexibility invest whenever you can. If I have ₹100 this month, I invest that. Next month if I earn more, I invest ₹200. Maybe the next month, ₹50. 

That flexibility is what we’re trying to bring in along with the ability to withdraw without major charges whenever required. It’s a big deviation from how we normally design long-term insurance products, but it’s essential for this segment. 

This requires backend changes too especially in investment management and logistics. Because collections will have to happen at the customer’s doorstep. For someone working in a village or as a gig worker, traveling to the insurance office isn’t feasible. 

So we’re trying to solve for that through partnerships and digital support. Our target is to launch this product by the end of this year. 

Vivek: 
From my understanding, I feel Bandhan customers would be more open to such a product. Is that the right assumption? 

Satishwar: 
Absolutely. Bandhan Bank’s customer base fits this segment perfectly especially in the lower-income and self-employed group. That’s why we’re starting with that ecosystem. 

But even beyond Bandhan, there are multiple partner networks across the country where such products can be distributed effectively. 

Vivek: 
Is this more oriented towards self-employed people, or can salaried folks also buy it? 

Satishwar: 
It’s more focused towards the low-income, self-employed segment — gig workers, freelancers, small business owners. For salaried individuals, income is predictable, so they can commit to fixed monthly premiums. 

But for self-employed individuals, monthly commitment is tough. If I tell someone to pay ₹500 every month, it becomes a pressure. But if I say, “Pay whenever you can ₹100 this month, ₹200 next,” that flexibility builds confidence and continuity. That’s what we’re designing for. 

Vivek: 
Got it. One more thing you had spoken earlier about how many people still aren’t familiar with the term insurance product. Even though it’s affordable and simple, most Indians still prefer guaranteed savings products. That’s why the penetration of pure term plans is low. Why do you think this imbalance exists? 

Satishwar: 
There are two ways of looking at it. One we measure penetration by premium amount. 

Now, the average ticket size for a savings plan is much higher than for a term plan. A savings policy could be ₹50,000 per year, whereas a term plan might be ₹10,000–₹15,000. 

So, if you look at it as a percentage of GDP by amount, savings plans will always look larger. But if you look at number of policies, term insurance is not doing that badly. 

Still, yes penetration is lower than ideal. 

Now, everyone in India understands what insurance means 99% of people know it’s about protection. But if you ask them whether they have it, most will say no. 

The main reason is discomfort talking about death. People don’t like discussing it, which is understandable. That’s why it’s still a push product you need to communicate it sensitively. 

That’s where Aegon’s “Come Insurance” campaign was brilliant. It reframed the conversation — saying, “You already have some insurance through savings, but it’s not enough.” It created awareness about the need for a larger term cover. 

Now, one very interesting fact in India, term plan pricing is among the cheapest in the world. Considering our longevity, our term insurance costs are still far lower than in developed countries. 

For the same ₹50 lakh cover, the premium you pay in India is significantly less than what you’d pay in a developed market. Of course, purchasing power parity differs, but in absolute terms, we’re still cheaper. 

So the product is accessible the issue is awareness. People must understand that it’s a risk mitigation tool, not an investment. 

A salaried person naturally feels the need because if their income stops, the family suffers. But for the self-employed, the logic is different. 

I once spoke to a kirana store owner and asked why he didn’t have a term plan. He said, “My business is my insurance. Even if I’m not there, my family will continue earning from the shop.” 

At that time, I actually found that convincing. But later, something happened that changed my perspective. 

That same shopkeeper’s son — a bright student studying commerce and preparing for CA — had to drop out after his father’s sudden death. He had to take over the shop to support the family. He lost almost a decade of his career. 

That’s when I realized yes, the business may continue, but the child’s future got compromised. A small insurance cover could have prevented that. 

So, anything can happen. It’s a small cost to secure your family’s continuity. 

Vivek: 
What do you think is the right age to buy a term insurance policy? Is there such a thing as the “right age”? 

Satishwar: 
The sooner, the better. 

There’s a commercial advantage to buying young premiums are spread over a longer period, so annual cost is much lower. 

For example, if you buy a policy at age 20 and keep it till 70, the premium is spread over 50 years. But if you buy at 40, it’s only over 30 years — so it’s naturally higher. 

But more importantly, if you have dependents you should have a term plan. 

Dependents don’t just mean financial ones even homemakers have dependents. The homemaker enables the breadwinner to go out and work. If something happens to them, the household balance collapses insurance at least helps cover financial strain. 

Similarly, even students can consider term insurance especially if their parents have invested heavily in their education. 

The yardstick I use is simple this is a risk mitigation product, not an investment. If you already have immense wealth, you don’t need a term plan. But if you’re starting your career, and you haven’t yet created a corpus, you absolutely should have one. 

The ideal scenario you buy a term plan early, and simultaneously start building your wealth corpus. By the time you’re 45–50, you might not even need it anymore because your corpus is sufficient. 

There’s even an exit option now most modern term plans include a “special exit value” feature. 

So, if you’ve bought a policy till age 70, you can choose to exit at age 55 or 60, and the insurance company pays back some of the premium. 

You have to opt for it at that stage not at age 69 when only a year is left. The idea is that by 55 or 60, you’ve built enough corpus to be financially independent. 

So, to sum up buy it early if you have dependents (financial or non-financial). Keep it till you’ve built sufficient wealth. Once you’ve created that corpus, you can discontinue because by then, your financial protection is self-sufficient. 

Vivek: 
Fair enough. Last question over the last few years, changes in tax laws have reduced the attractiveness of life insurance under 80C. Many people have shifted to the new tax regime. Has that impacted sales? 

Satishwar: 
Not significantly. 

Product innovation and customer awareness have made life insurance valuable beyond tax benefits. That said, I still believe tax incentives help especially in a country where social security is limited. It encourages people to buy protection. 

Historically, yes, we see strong seasonality the Jan–March quarter (JFM) remains the peak season. Around 30–40% of annual business still happens in that quarter. Some of it is habit; some of it is planning. 

But even without tax push, the product stands on its own merit especially for middle-income customers. It serves long-term objectives extremely well whether you want guaranteed returns or market participation, or even regular income through annuity-type plans. 

Yes, the ultra-HNI segment may have some impact due to tax caps, but overall, the insurance value proposition remains strong. 

Vivek: 
Thank you so much, Mr. Satishwar, for speaking to us. It was a very insightful conversation about insurance. 

Satishwar: 
Thank you very much, it was a pleasure. 

Vivek (Closing): 
And that’s it for this episode of Bazaar & Beyond. I hope today’s conversation helped you understand how a simple life insurance product can reduce the impact of an income shock on your household in case of an untimely death. 

Stay safe and invest wisely. 

Investments in securities markets are subject to market risks. Read all related documents carefully before investing.