India pegged at a poor life insurance Protection Quotient of 35, term insurance uptake significantly low; reveals the Survey
New Delhi, February 23, 2019: Max Life Insurance, one of India’s leading private life insurers, revealed that Indians feel grossly underprepared to face the financial instability caused by eventualities of life. As per the survey conducted by Max Life and Kantar IMRB, urban India stands at the Protection Quotient of 35 out of 100. India Protection Quotient (IPQ) is a survey conducted by Max Life and Kantar IMRB that employs a three-dimensional approach to determining policyholders’ level of protection, by evaluating their life insurance ownership, awareness levels and mental preparedness around protection.
With a sample size of 4,566 respondents, the survey was administered to respondents of different demographics and age groups across 15 metropolitan and tier 1 cities in India. The survey primarily measured their level of knowledge and ownership of various life insurance products, the degree of term insurance preference and penetration, primary fears and triggers to life insurance purchase, preferred channel of policy purchase, roadblocks to owning life insurance that served to validate the overall IPQ level pegged at a poor 35.
Prashant Tripathy, Managing Director and CEO, Max Life Insurance said: “The survey reveals some interesting and startling findings of the state of protection in the country as well as the attitudes, behaviours and apprehensions that people have around life insurance. Term Insurance, despite being the most fundamental and cheapest form of financial protection, still lacks a significant uptake in urban India. There is an urgent need for Indians to understand the true value of protecting one’s family from the uncertainties of life. We hope the results of this study, act as a wake-up call for consumers and the industry at large and help increase financial protection in the country.”
Speaking on the findings of the India Protection Quotient, Soumya Mohanty, Chief Client Officer, Kantar IMRB said: “The India Protection Quotient is a survey that has uncovered some deep insights on the attitudes, preferences, challenges and concerns of urban Indians towards life insurance and protection. In a country that is evolving each day, the research specifically focuses on demographic and geographic cohorts such as Millennials, women and youth, that reflect how various members of society approach protection.”
While two third of urban India owns life insurance, only one-fifth of them own term insurance and close to 53% are unaware of term insurance and its benefits
The survey found that a low uptake coupled with lack of awareness of term insurance, which is designed to offer financial protection to policyholders, is contributing to an overwhelming number of people feeling under-protected.
It was revealed that while 65% of respondents owned life insurance the percentage of term insurance owners was a paltry 21%. Of those who own term insurance, as high as 57% do not have any awareness of the sum assured they’re guaranteed on their policy. Additionally, 70% perceive that term insurance is relevant only for the breadwinner of the family.
More than half of the respondents (53%) surveyed feel that their cover is insufficient. The inadequacy of protection is also felt by the fact that only 1 in 10 term buyers are invested in any critical illness rider. Additionally, 80% of urban Indians are not even aware of the cost of treatments of critical illnesses.
The threat to financial security and the inability to sustain current lifestyle among the greatest fears
The survey revealed that for more than 50% of urban Indian the biggest fears related to the demise of the breadwinner are financial insecurity and impact on their current lifestyle. The threat perception gets further increased due to a feeling of inadequacy of funds. More than one third (36%) of urban Indians feel that their savings would last less than a year if critical illness or death was to befall. More than one-fifth of the population feels they have no one to support them in the event of critical illness or death.
Indians financially underprepared to tide over costs for critical illnesses
The survey brought to light that India underestimates the cost of Critical Illness and is underprepared to battle a health crisis. Only10% term buyers are invested in any critical illness rider, and over 80% aren’t even aware of the costs of treatment for critical illnesses like heart disease or cancer. 21% believe there will be no one to support them financially if they were to be diagnosed with a critical illness. 80% are not even aware of the treatment costs of diseases. Only 12% realized that critical illness can prey upon the family, whereas 42% have not even thought about it.
Delhi highest on protection quotient, South and East India lead term insurance adoption
With IPQ of 46, Delhi was discovered to be the city that feels most protected and Ludhiana at 21 ranked the lowest in the India Protection Quotient. Delhi also has the highest awareness of term insurance. Bhubaneshwar has the highest term ownership across all metros and tier I towns and Vizag has the best conversion ratio between life insurance to term insurance. With relatively higher life insurance awareness and ownership, South India feels savings will last longer than that of the rest of India. East is the lowest on that parameter.
Women are grossly under-protected in India. Only 33% of women save for future stability
With 42% of their earnings being diverted to basic expenses as against working males in metros who spend 38% of their earnings to basic expenses, working women in metros tend to spend less on savings and investments. The savings objectives of working women in metros are more focused on saving for kids’ education and less on old age security and untimely death of a breadwinner (only 33% saved for this).
The ownership of life insurance and term insurance is also lower in females as compared to males. 59% of women in urban India own life insurance policies with only 19% owning term policies.
Millennials prioritize spends on luxury and travel over protection
Urban Indian Millennials in the age group of 25 – 35 years are seen to spend on travel, luxury, with nearly 43% not even thinking of protection of their families. Millennials with kids, however, save more for their children’s education and marriage and the primary motivation to buy term insurance is to secure a financial amount for these aspirations in future. When compared to the rest of the demographics, Millennials with kids have an overall greater term insurance awareness and subsequent ownership of 22% as against a general level of 21%.
Indian youth and affluent prioritize travel and luxury over financial protection and retirement
The survey found that young and the affluent do not prioritize protection. In comparison to the elder counterparts, urban youth spends more on luxury items like buying a car, house, holidays as against protection, saving for retirement or child marriage, the affluent class directed its wealth towards investments and savings. Only 44% of youth are aware of term insurance and just 17% own it. It was found that an alarming 22% of urban Indian youth do not even consider buying a life insurance policy due to other investments that they have.
Indians generally do not consider Planning for Death as a need for Insurance that will protect the financial gaps of their dear ones
Death is still a taboo even amongst the educated urban Indian, where over one fifth (21%), do not like to think of death.
Urban Indians still show a preference to purchase life insurance from agent advisors
Indians tend to buy term insurance from agents rather than directly from the insurers. 79% of urban Indians would prefer to buy life insurance from agent advisors and another 15% from their banks. 94% of those surveyed bought term plans from the agent or the bank. The survey highlights that females, non-graduates and those from non-metros are more likely to approach a bank or an agent. More than 50% also stated that a key trigger to buy a term insurance plan was an initial approach by an agent.
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