In a notable development in terms of financial preparedness, a recent report found that three-quarters of India's urban population has accepted life insurance products, indicating significant progress in India's urban financial landscape.
Max Life Insurance on Tuesday released its India Protection Quotient (IPQ) 6.0, which surveyed 4,700 respondents across 25 Indian cities, noting that life insurance sales through digital modes have increased compared to the last survey.
The protection index reached an all-time high, from 43 points for IPQ 5.0 to 45 points for IPQ 6.0, reflecting a positive trajectory in the development of protection awareness and adoption in the country.
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At the same time, life insurance ownership levels increased from 73 (IPQ 5.0) to 75.
Over the past five years, the India Protection Quotient has witnessed an impressive 10-point increase from 35 points for IPQ 1.0 to 45 points for IPQ 6.0, repeating Urban India's uninterrupted journey towards building financial resilience, the report said. .
Previous findings showed that South India retained its status as the most financially protected region with a protection index of 49 points, followed by West India, which showed a notable improvement in financial preparedness compared to 42 points for the IPQ 5.0. At IPQ 6.0 it is 46 points.
In this edition, the North and East regions lagged behind in terms of financial protection, with 41 and 40 points respectively.
The following findings reveal insights that highlight the changing attitudes and approaches to financial provisioning in Indian cities.
Financial preparedness of urban Indians.
The greatest progress has been made in awareness of life insurance products since IPQ 1.0, with the knowledge index increasing by more than 50%. The life insurance ownership rate soared to 75%.
In a positive move, urban India has seen a significant increase in life insurance awareness over the past six years with the knowledge index increasing from 39 in IPQ 1.0 to 61, as per the IPQ 6.0 study.
Life insurance ownership has also steadily improved from 65% in IPQ 1.0 to 75% in IPQ 6.0 survey, indicating urban India's steady path towards financial protection from unexpected challenges.
Metro and Tier II findings revealed significant gaps in protection indices.
IPQ 6.0 showed a large gap in the IPQ scores of metro cities and Tier II cities. Metro cities came closer to the halfway mark with 49 points, while Tier I cities secured 45 points, while Tier II lagged behind with 36 points. These gaps highlight the ongoing challenge of increasing life insurance awareness and accessibility in small urban centres, and highlight the need for targeted interventions to address barriers to financial flexibility.
Interesting trends in financial behavior and savings patterns in urban India
The growing burden of healthcare costs has emerged as a top concern among urban Indians, with nearly two-thirds of the population expressing significant concern. Despite growing interest in pursuing a financially secure retirement, saving for retirement is taking a backseat as urban Indians prioritize other savings goals such as children's education and marriage.
Outlook for term insurance
IPQ 6.0 widens the gap between awareness and use of term insurance.
Despite increased awareness of term plans, from 64% in IPQ 5.0 to 70% in IPQ 6.0, term insurance ownership increased from 30% in IPQ 5.0 to 31% in IPQ 6.0, a marginal improvement since the previous version.
The growing gap between ownership and awareness of term insurance products reflects changes in savings priorities, as IPQ 6.0 shows how low importance was placed on respondents against protection against the untimely death of the head of the household.
With regard to other life insurance products, IPQ 6.0 highlighted that while four in 10 urban Indians currently own at least one savings product, preference for ULIPs remains low with ownership levels at 14%. It was also found that urban Indians attach higher importance to coverage and riders when purchasing term insurance, while the priority assigned to premiums has decreased.
Not thinking about life insurance and other investments is a major barrier seen in this edition. An interesting thing to note is that today, one in four Indians prefer health insurance over life insurance. This highlights the value Indians place on health.
Millennials and Non-Millennials
Intergenerational financial preparedness reveals gaps.
The latest data shows interesting changes in financial preparation across different generations. Millennials are almost on par with non-millennials in terms of financial preparedness, with a Protection Index of 45 and 46, respectively, but Gen Z lags slightly behind with a Protection Index of 42. IPQ 6.0 highlights notable gaps in life insurance ownership levels. Generation Z is 69 years old and the non-millennial generation is 79 years old.
Interestingly, Gen Z scores higher on security, with a score of 66, indicating strong financial stability, surpassing non-millennials (63). Gen Z shows promise in financial planning, but there is room for improvement, especially in the use of term insurance.
Salary earner vs self-employed person
Self-employed urban Indians improved their knowledge scores by 9 points in just one year.
While salaried individuals maintain relatively stable IPQ scores, urban self-employed workers are making progress in preparing financially for an uncertain tomorrow. Reflecting significant improvements in financial knowledge and awareness, the self-employment sector's Knowledge Index is 64 – 3 points higher than the national Knowledge Index score.
This surge in knowledge is paralleled by a substantial increase in ownership levels (from 73% to 77%). This indicates how the group is actively addressing gaps in financial protection.
Digitally-savvy urban Indians
With an IPQ of 54, Urban India's digitally savvy consumers are better financially protected than any other group.
The data shows that the protection index of digitally proficient urban Indians was nine points higher than that of the non-digital group, with the group score being 54, compared to 45 for the non-digital group. The knowledge index remains highest at 73 in the digitally literate urban Indian cohort, with 80% of respondents holding life insurance.
Traditional channels, such as agents, are still prevalent, but there is a shift toward online channels, reflecting digitally savvy consumers' preference for convenience and accessibility. The significant increase in fitness app subscribers from 11% to 24% in less than a year highlights the evolving lifestyle choices and preferences of urban Indians.
Max Life MD and CEO Prashant Tripathy said that over the past five editions, IPQ has become a true barometer for measuring the level of financial protection in urban India.