At a time when life insurance penetration is just 2.74%, urban Indians continue to feel financially insecure and are under-prepared to cope with financial instability caused by life events. The second edition of Max Life Insurance India Protection Quotient (IPQ 2.0) shows a marginal improvement in the index to 37 from last year’s 35 on a scale of 1-100. However, there is a significant increase in awareness regarding life insurance products, especially term plans for pure protection.

Most notably, the Knowledge Index rose by nine points from last year to clock 48 and life insurance ownership increased by 500 basis points (bps) to 70% from last year. Term insurance ownership increased by 700 bps to 28% whereas term awareness rose 1000 bps to 57%.

Every seven out of 10 respondents consider return on premium the most important benefit they would like to have on their term plan. The second in the preference order is flexible payment of cover followed by life stage benefits. The survey shows that only half of the respondents feel that their term plan’s sum assured is sufficient to cover their family in case of any eventuality.

The survey was conducted in association with Kantar among 7,041 respondents across 25 cities comprising six metros, nine Tier 1 and 10 Tier II cities. In last year’s survey, there were 4,566 respondents from 15 cities. The survey identifies attitudes, mental preparedness around future uncertainties, awareness and ownership of life insurance product categories such as term, endowment and linked.

Prashant Tripathy, MD & CEO, Max Life Insurance, says that the sharp increase in awareness and ownership of life insurance and term insurance can be seen as a precursor to higher protection quotient in the years to come.

South India tops
Region-wise, south India continues to outperform other three regions in IPQ of 40 as compared with north’s 37, east’s and west’s 35 each. Life insurance ownership in south India is 77 against 76 in east, 65 in north and 64 in west. The knowledge index in south is 51 as compared with 49 in north and 45 each in east and west.

City-wise, Delhi continues to lead with IPQ of 47 (two points more than last year) followed by 46 in Hyderabad and 43 in Ahmedabad. While south India tops the IPQ, Chennai surprisingly witnessed decline of three points. The industrial capital of Punjab, Ludhiana, feels the least financially protected in the country with IPQ of 27. Interestingly, the city recorded the sharpest increase of six points compared to last year.

Savings over protection
Most respondents in Tier II cities said that they prefer endowment products to term products. Respondents in Tier II cities such as Dehradun, Moradabad, Guwahati, Bokaro, etc., show higher level of endowment insurance awareness and ownership at 57% and 30%, respectively. The trend suggests that people in these cities are more conventional when it comes to buying life insurance and are yet to move towards more protection plans.

While life insurance ownership for working women in Tier II cities stood at 60%, term insurance was just 15%, as women focused more on returns than on long-term financial protection. However, awareness of critical illness cover is growing among women.

The survey shows that only 10% of term insurance buyers invest in critical illness rider. There is no change in the adoption rate of riders to enhance and customise protection since the first survey was done last year.

In agents, people trust
While insurers are focusing on digital mode, most people still prefer buying term insurance from agents rather than online. While 37% of term buyers were aware that policies are cheaper online, 68% of them bought term plans from agents because of the ease of human interaction and trust. Respondents gave more importance to agents and brand goodwill while selecting a life insurance provider.