Why is life insurance losing lustre as a savings scheme for India's youth?

As life insurance loses share in households' financial savings, insurers are rushing to create new products, mostly in health insurance, to stay engaged with a younger demographic

A recent corporate presentation by the Life Insurance Corporation, India's largest insurer by value, highlighted a disconcerting issue facing insurance firms: that of how dimly millennials in India view the need for insurance. Not surprisingly, the share of life insurance in the incremental household financial savings of Indians has begun to dip after a brief surge following the Covid-19 pandemic. What's more, the decline in share comes at a time when the overall basket of incremental household financial savings is growing.  

 

Young people in India, it would seem, are simply not interested in buying long term insurance, reflecting a global trend. A Pew Research Centre data shows 80 percent of millennials  globally are of a mind that they have more significant financial priorities than  insurance,  such as living expenses, student loan debt, and home/apartment rentals. Clearly, among financial products, insurance seems to be lower down the ladder. The implications, however, are sizable for a country like India, where the spread of insurance is thin to begin with.

 

The LIC data showed that life insurance purchases peaked in financial year 2021 at 18.26 percent of the incremental financial budget of households. It has since slipped to 18.18 percent in FY23, the latest year for which India’s largest life insurer has compiled data. Since life insurance is a long term buying habit, it stands to reason that the numbers should not move much year-on-year. Yet the dip is clear, and the reluctance among younger people to buy insurance could well push it down to the pre-Covid level of 16.46 percent. 

 

Since the Indian population is preponderantly young, the dip is expectedly acute in that cohort. It also accounts for the strange phenomenon where, despite rising per capita income, insurance penetration has not crossed 4 per cent. The ratio is measured as a comparison of premium paid for insurance to GDP.

 

Insurance a low priority

 

Data from other sources also corroborates the dip. A seminal study conducted in 2023 by Pune's National Insurance Academy (NIA) is clear about the reasons. In the survey, when millennial respondents were asked about the factors, if any, that prevent them from making sufficient investment for retirement purpose, about 21 percent of the respondents expressed that they have no difficulty saving for retirement. Another 7 percent said there was no need for developing a purse to provide for retirement. The caveat here is this was a study about their choice for pension, and not necessarily an insurance product. Still, the trend shown in the LIC data sits well with the disdain for pension products in this age group.

 

“According to industry practitioners, the millennials of today are not ready for long-term financial commitments, even though their parents nudge them for such investments,” says the study, about the most detailed one about the behaviour of the younger population about the need to buy insurance products.

 

A state of denial

 

However, no insurance practitioner is willing yet to acknowledge this generational shift. Aman Batra, chief strategy officer of InsuranceDekho, a marketplace for insurance products, told Business Standard “The level of interest among them (millennials) has grown steadily, although their motivations and buying behaviour are markedly different. While older generations often viewed insurance through the lens of tax-saving or legacy planning, today’s younger cohorts are approaching it as a proactive financial safeguard”.

 

Yet this is not clearly visible. While household gross financial savings in India (as a percentage of GDP) rose in fiscal 2024, insurance purchases have trailed. In annualised premium equivalent, the life insurance industry grew at a 13.2 percent compounded annual growth rate (CAGR) in two years between May 2023 and May 2025, a clip just marginally ahead of the country's nominal GDP growth rate.

 

As an Allianz Global Insurance Report for 2025 notes, in Asia, the demand growth in the markets “is driven by the state of the social security system, i.e. the level and quality of public healthcare”. So health insurance grew by more than 7 percent “particularly in Asia”. For those in the young population whose need for health insurance is already met by company policies or otherwise, the urge to buy other insurance products is correspondingly, very low.

 

Banking on new products

 

So what can insurance companies do to sell to this demographic? Health remains the best bet, which is why most insurance companies are innovating their products. In a more recent report, NIA notes “The 26-35 age group exhibits a protection gap exceeding 90 percent. Despite lower awareness in this segment, insurers can appeal to their desire to build assets and savings for the future by bundling savings products with risk protection covers. Tech-savvy and responsive to online channels, this segment can effectively be reached through digital platforms, although some may seek guidance from agents or wealth managers”. The report also notes that middle-income households earning between Rs 5 lakh-Rs 10 lakh display a similar protection gap of over 90 percent for 70-80 percent of the respondents.

 

“We are also seeing the rise of contextual, lifestyle-linked products among Gen Z and younger millennials," says Batra. "These include gadget insurance, cyber risk covers, travel insurance, and critical illness plans. These products align with the assets and risks relevant to their day-to-day lives—devices, digital identities, and wellness and point to a broader mindset that insurance isn’t just about major life events, it’s about safeguarding what matters today”.

 

A report by Boston Consulting Group written in December 2023 makes the same point. “It seems that younger generations — Gen Z and Gen Y (ages 18 to 25 and 26 to 41, respectively) — are the most open to innovation in their insurance interactions and products,” it says

 

Venkatesh Ganapathy, associate professor at Presidency University in Bengaluru, in a 2023 piece in the Journal of Management and Entrepreneurship, notes this could even mean the need to redefine basic insurance concepts to bring millennial customers into the fold.

 

This is complicated because insurance, by its very nature, is a bit of crystal ball gazing and to keep the here-and-now obsessed youngsters, insurance companies must develop a feel for the present, too.