Many Indians' intent to buy insurance doesn't lead to action: Report

Consumers spend 11% of their annual income on life insurance and 8% on health insurance, it says

Indian consumers realise the significance of insurance for financial security but there is a gap between their intent and action, said a report on Monday.

As many as 97 per cent Indians agree that life insurance coverage must increase over the years but it does not translate into action, said the report, ‘Demystifying the Indian Consumers’ Illusions: 2023’, SBI Life Insurance conducted in partnership with Deloitte.

On average 52 per cent of the annual income of Indian consumer households is allocated for financial security. Out of that amount, 17 per cent is allotted for savings, 16 per cent towards financial assets, 11 per cent for life insurance and just 8 per cent for health insurance.

 

The coronavirus pandemic prompted consumers to improve their financial security, but as the impact of the disease recedes rising inflation and living cost have again become a concern, said the study conducted in 41 cities among more than 5,000 respondents.

As many as 80 per cent respondents acknowledged the role of life insurance in achieving financial immunity. Even respondents who do not have insurance, 71 per cent of them acknowledged the significance of having a policy.

Intention to secure coverage does not convert into action because of misconceptions like that mere ownership of insurance policy guarantees protection, policies can be forfeited in the event of fund shortage, investment in financial instruments provides better security, ownership of assets and savings can work as a replacement for life insurance, and employer-provided insurance cover is sufficient.

As many as 68 per cent of consumers who own insurance policies believe that they are sufficiently insured. However, as per experts only 6 per cent of them are in fact sufficiently insured. The consumer attributes lack of funds as the key reason for lack of adequate coverage.

Similarly, 47 per cent of consumers said they have not renewed their policies in the last five years as they had invested in other financial assets or savings as a means to ensure financial security without giving due consideration to the expenses in case of financial and medical emergencies.

As many as 68 per cent of consumers considered employer-provided insurance sufficient for their needs. “However, it is observed that 96 per cent of employees covered solely under employer provided insurance coverage are underinsured,” said the report.

The lack of insurance and inadequate coverage are significant tasks for the insurance industry to narrow the existing gaps between intention and action. Meanwhile, there are consumers willing to purchase life and health insurance policies in the next five years. “Approximately 46 per cent plan to buy life insurance and 39 per cent intend to purchase health insurance within the next year.”

The report noted that the government, regulators, decision-makers, corporations, and institutions must take an active role in addressing the gap and encourage citizens to obtain adequate insurance coverage for their financial immunity. Additionally, social media can also help to encourage the sentiment among the younger generation.

A comprehensive customer education strategy that explains the difference between insurance and investment options ensuring availability of simplified insurance products with affordable premiums among others can play a pivotal role in increasing financial literacy, enhancing insurance awareness, and driving higher adoption rates for consumers.