MUMBAI: The overall intention to purchase life insurance policies in India has taken a hit as a result of the weak economic landscape with the intention to invest dropping by three percentage points. This even as penetration of life insurance as an investment vehicle in urban India gained three percentage points from 63 percent in 2010 to 66 percent this year. The gain is on the back of significant increase in penetration in the metros from 59% to 64% and amongst women from 53% to 59%. However, non-metros with limited diversification in portfolios continue to lead with a penetration of 68%. The south continues to remain the lowest in terms of penetration. Traditional policies continue to make up for a large part of the pie (86%) while ULIPs are down to 14% (from 23%).
These are some of the findings of the fifth round of LIFE 2013, a Usage and Attitude study recently released by Nielsen, leading global provider of information and insights into what consumers watch and buy. The study was conducted across 17 cities, covering 11,500 respondents, aged between 22 and 50 years, and aims to understand and measure the Indian consumer’s behaviour and attitude towards investing in life insurance.
Illustrating the challenges faced by the Insurance industry in India, the study found that the intention to invest has dropped by three percentage points from 20% to 17%. The drop in intention is mainly due to a fall in savings owing to inflationary pressure on the lower social economic classes (SEC B and C). Interestingly, the biggest drop is expected in the western zone where the penetration has not increased over 2010. This is because the west has now overtaken the North in terms of share of consumption and is now the highest across India.
The age group of 22 to 30 continues to exhibit a higher intent to purchase (18%) life insurance than the population average owing to a much lower penetration at 60%. The upside of a drop in purchase intention amongst lower socio economic classes is the likely increase in the average premium paid per policy. Traditional policies are likely to make up for the bulk of the purchases (88%).
“The consumption and savings story in India is at an interesting stage. There is evidence of higher absolute savings, although share of savings is lower. Lower income groups in Urban India are impacted much more by the economic slowdown and inflation and this may have a significant impact on insurers targeting consumers paying lower premiums,” said Subhash Chandra, Executive Director, Nielsen India.