81% rural, 62% urban households have no risk cover: Survey

Awareness about insurance is quite high in India, yet less than three out of 10 households in the country have opted for some kind of life insurance cover, a survey said.

"The awareness about insurance is quite high in India. Around 78 per cent of households are aware of insurance products. However, ownership of insurance products is low "" only 24 per cent households in the country own a life insurance cover", the survey by Max New York Life-NCAER on 'How India Earns, Spends and Saves' said.

The survey, which is based on figures for 2004-05, pointed out that bulk of the urban households (90 per cent) are aware of the life insurance policies and their benefits.

However, it added, despite high level of awareness, only 38 per cent of the urban households have purchased life insurance products, implying that 62 per cent of the households living in cities and towns have no insurance cover.

The similar set of figures for rural areas indicates that about three-fourths of the households (73 per cent) were aware of insurance but only two out of 10 households (19 per cent) have actually purchased the policies.

About 86 per cent of the those who were aware of insurance considered life insurance as the most important product followed by health (6 per cent), automobile (5 per cent) and crop (3 per cent).

The awareness of insurance, it further said, was 96 per cent among regular salary earners followed by non-agriculture and self-employed persons (89 per cent), agriculture households (77 per cent) and labour households (63 per cent).

Pointing out that awareness of insurance was high among households with large income, the Max New York-NCAER survey said, "The awareness decreases as we go down the income quintile hierarchy with just 55 per cent of households in the lowest income quintile group aware of insurance."

It also pointed out that awareness of insurance was more among the households having larger landholdings than those with smaller landholdings or landless workers.

A majority of life insurance owners in the country are married (87 per cent), the survey said, adding, "Just 11 per cent owners are unmarried and a minimal 2.6 per cent fall under categories such as divorced, widowed etc."

Trying to establish a link between insurance and prosperity, the survey said, those households which owned life insurance policies were more prosperous, more educated and owned more consumer durables than those that do not own life insurance.

Pointing out that life insurance is also a function of education, the survey said, the incidence of insurance was high among households where the chief earner was educated than those households managed by illiterate persons.