These are the findings of a survey conducted by Max Life Insurance Company Limited. The survey, India Protection Quotient Survey (IPQ), was conducted in partnership with KANTAR.
As per the findings, the knowledge index in rural India stands at 27, even as a high sense of financial security (38%) prevails. While saving for children’s education and marriage has emerged as the top objective, there are also concerns about saving and spending for the future. In the survey, three out of four participants expressed concern over a reduction in savings over the next 10 years, while one in four was unsure about the savings corpus required for the future.
Prashant Tripathi, MD & CEO, Max Life, said, “India is taking positive steps towards more inclusive growth, and it is becoming more imperative to focus on building the rural economy. We have extended our established IPQ study across 113 villages to taken to understand how rural India plans its finances. While life insurance penetration in India is low, this study has helped identify gaps and opportunities for the life insurance ecosystem, and collectively To work towards creating a systematic, scalable, multi-pronged approach that can empower rural people to achieve their financial aspirations.”
The following findings reveal the financial security status of rural India and provide insight into its priorities and concerns.
Financial Preparedness of Rural Indians
• Long journey for rural India: Survey reveals urban-rural divide
The survey has thrown light on an important issue plaguing the country – the urban-rural divide. The findings reveal that rural India has a significantly lower score of 12 on the Protection Quotient Scale as compared to urban India’s score of 43, indicating large opportunity areas in enabling financial security. This disparity also highlights the urgent need to empower households in rural India to be better prepared financially. While government efforts for ‘insurance for all’ through schemes such as the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Saral Jeevan Bima, and Pension Yojana, among others, have seen more success, this has been achieved through an effective public Yes-Private participation can increase the penetration of life insurance in the country.
• Rural India struggles to scale financial output: Wide gap in awareness and ownership of life insurance products
The survey highlights that with a knowledge index of 27, rural Indians are less aware of life insurance products, while urban India’s knowledge index was more than double at 57. However, the difference in financial security between urban and rural India was not that great. As for other metrics, the safety level in rural India is 38% as opposed to 63% for urban India, indicating a respectable safety attitude across the country.
outlook towards financial security
• Barriers to financial security: High premiums and insufficient funds to invest in life insurance products
According to the survey, almost half of the respondents from rural India expressed concern over insufficient funds to buy life insurance products. One in three cited high premiums as a significant barrier to purchasing life insurance, and one in four respondents felt the purchase process was cumbersome with too many formalities. Similarly, two out of five said they have not considered buying life insurance to provide financial security for their families.
• Rural India prefers savings products over term plans; However, the ownership of both savings and term plans is alarmingly low
In line with the national trend of prioritizing savings over protection, rural households prefer savings instruments over term insurance plans. Awareness about savings and term plans was as high as 31% and 32%, respectively. However, the low ownership of savings products (9%) and term plans (12%) emerged as a cause of concern, demonstrating the urgent need to introduce suitable products to increase life insurance penetration in the country.
saving and spending pattern
• Savings mindset of rural India: Preference for traditional asset classes like gold and fixed deposits becomes evident; Focused on savings goals such as children’s education and retirement benefits
The survey revealed that rural India is inclined to invest in traditional financial products like gold and fixed deposits. Positively, around 83% respondents were aware of government supported schemes. In sync with their commitment to save for their families’ future, 64% of India’s rural population showed a propensity to save for their children’s education, while 41% cited the imperative of saving for children’s marriage.
• Basic household expenses take up most of rural India’s earnings
Rural India spends a large proportion of its income on basic expenditure, with negligible allocation for other discretionary expenditure. The savings and expenditure pattern of rural India is different from the savings and expenditure allocation of urban India. While rural Indians allocate 55% of their earnings to basic expenses, urban India allocates only 42% to this non-discretionary category. In contrast, luxury spending accounts for 15% of urban Indians’ income, while rural Indians allocate only 5% to such expenses. The savings-investment gap remains narrow with urban and rural India allocating 43% and 39% of their income to this spending segment, respectively.
• Rural India worried about rising spending and falling savings
Concerns about the rapid reduction in savings persist across rural India, with three out of four respondents expressing concern about a reduction in their savings over the next 10 years. The survey revealed that six out of 10 in rural India have started cutting their expenses in line with rising prices, while 1 out of 2 are unable to manage daily expenses. Additionally, 1 in 4 respondents were unsure about the savings corpus required for the future.
Rapid Digitization Emerges New India
• Rural India accessing the world from the comfort of their homes
In a positive vein, the survey shows that rural India is accessing the world by leveraging technology from the comfort of their homes, with 64% of rural respondents using mobile phones to engage in social media messaging/chatting And 58% are using the phone to text or watch a movie. Video. However, only 17% use a phone for online financial transactions, indicating that better measures are needed to accelerate digital financial awareness in rural areas of India.
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