Rural India says inadequate funds and high premiums deter them from buying life insurance


Max Life Insurance Company has unveiled the findings of its first-ever rural edition of its flagship survey India Protection Quotient survey (IPQ) which indicate, among several things, that only 22% of India’s rural population own life insurance products, compared to 73% across urban India.

The survey, conducted in partnership with KANTAR, a data analytics and brand consulting company based in London, finds that the low uptake of insurance in rural India can be primarily attributed to inadequate funds to buy life insurance (41%), high premiums (32%), and multiple buying formalities (24%).

Mr Prashant Tripathy, MD & CEO of Max Life, said, “India is taking positive strides towards more inclusive development, and the focus on building rural economy is becoming more imperative. We took our established IPQ study to 113 villages to understand how rural India plans its finances. While the life insurance penetration in India remains low, this study has helped in identifying the gaps and opportunities for the life insurance ecosystem, and avenues to collectively work towards creating a systematic, scalable, multi-pronged approach that can empower the rural people to achieve their financial aspirations.”

The survey was conducted across 113 villages in November and December 2022.

Other findings reveal rural India’s financial protection state and provide insights into its priorities and anxieties.

• Rural India struggles across metrics of financial production: Large gap in awareness and ownership of life insurance products

The survey highlights that with a Knowledge Index score of 27, rural Indians are less aware of life insurance products, while urban India’s Knowledge Index score is more than double at 57. However, the gap in financial security between urban and rural India is not as stark as other metrics, with security levels in rural India at 38% as opposed to 63% for urban India, indicating a respectable security outlook across the country.

Barriers to financial protection: High premiums and inadequate funds to invest in life insurance products

Nearly half of rural India’s respondents are concerned about insufficient funds to purchase life insurance products. One in three cite high premiums as a significant barrier to life insurance purchases, and one out of four respondents feels that the purchase process is cumbersome with multiple formalities. Similarly, two in five say they have not thought of buying life insurance to financially protect their families.

• Rural India prefers savings products over term plans; however, the ownership of both savings and term plans is alarmingly low

Consistent with the national trend of prioritising savings over protection, rural households prefer savings instruments over term insurance plans. The awareness of savings and term plans is almost on par with 31% and 32%, respectively. However, the low ownership of savings products (9%) and term plans (12%) emerges as a cause for concern, showcasing an urgent need to bring in suitable products to enhance life insurance penetration in the country.

Rural India’s savings mindset

The survey reveals rural India’s inclination to invest in traditional financial products such as gold and fixed deposits. On a positive note, about 83% of respondents are aware of government-backed schemes. Aligning with their commitment to saving for their families’ futures, 64% of India’s rural population show an inclination to save for their children’s education, while 41% cite their offspring’s marriage as a savings imperative.

Basic household expenses take up the majority of Rural India’s earnings

Rural India spends a major chunk of their income on basic expenditures with negligible allocation towards other discretionary expenses. The saving and spending pattern of rural India is different from urban India’s saving and expense allocation. While rural Indians divert 55% of their earnings towards basic expenses, urban India allocates only 42% towards this non-discretionary category. Conversely, luxury expenses take up 15% of the urban Indian’s income, while rural Indians only allocate 5% for such expenses. The gap in saving and investment remains low with urban and rural India allocating 43% and 39% of their earnings, respectively towards this spending class.

• Rural India’s anxieties towards increasing expenses and depleting savings

While children’s education and marriage emerge as top savings objectives, multiple anxieties around savings and spending abound. Anxieties surrounding the rapid depletion of savings remain consistent across rural India, with three in four respondents expressing concern about their savings diminishing in the next 10 years. The survey reveals that six out of 10 in rural India have started to cut down their expenses to keep up with rising prices, while 1 out of 2 is unable to manage daily expenses. Additionally, 1 out of 4 respondents is unsure about the amount of savings needed for the future.

Rural India is connected online to the rest of the world

Rural India is accessing the world by leveraging technology from the comfort of their homes, with 64% of rural respondents using mobile phones for engaging in social media messaging/chatting and 58% using phones to watch movies or videos. However, only 17% use phones for online financial transactions, highlighting that better measures are needed to build digital financial awareness and uptake in India’s rural regions.

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