India is home to the world’s largest rural population and is making positive strides toward more inclusive development. However, a stark urban-rural divide exists in terms of financial preparedness, with rural India lagging behind significantly in terms of protection quotient and life insurance ownership.
A first-ever rural edition of Max Life’s flagship India Protection Quotient (IPQ) survey conducted in partnership with KANTAR highlights the gaps between the urban and rural regions of the country and the need to empower rural India’s households to become better financially prepared.
Where does rural India stand?
The findings of the survey reveal that rural India has a score of 12 points on the Protection Quotient scale, which is significantly lower than the score of 43 achieved by urban India in IPQ 5.0. The life insurance ownership gap is even more pronounced, with only 22% of rural India owning life insurance products, compared to 73% across urban India.
The Knowledge Index in rural India stands at 27 as compared to 57 in urban India, indicating a large gap in awareness about life insurance products. Although the financial security levels in rural India are lower than in urban India (38% as opposed to 63%), the gap is not as stark.
Barriers to financial protection
High premiums and inadequate funds to invest in life insurance products emerged as the major reasons for the low uptake of life insurance products in rural India. Nearly half of rural India’s respondents expressed concern over insufficient funds to purchase life insurance, while one-third cited ‘high premiums’ as a significant barrier. Additionally, two-fifths said they had not thought of buying life insurance to financially protect their families.
Savings and spending patterns
The survey has revealed rural India’s inclination to invest in traditional financial products such as gold and fixed deposits. Aligning with their commitment to saving for their families’ futures, 64% of India’s rural population showcased an inclination to save for their children’s education, while 41% cited kids’ marriage as a savings imperative.
Rural India spends a major chunk of their income on basic expenditures with negligible allocation towards other discretionary expenses. The saving and spending pattern of rural India is different from urban India’s saving and expense allocation.
While rural Indians divert 55% of their earnings towards basic expenses, urban India allocates only 42% towards this non-discretionary category. Conversely, luxury expenses take up 15% of the urban Indian’s income, while rural Indians only allocate 5% for such expenses.
Anxieties surrounding the rapid depletion of savings remained consistent across rural India, with three-fourths of the respondents expressing concern about their savings diminishing in the next ten years. Additionally, one-fourth of the respondents were unsure about the corpus of savings needed for the future.
Digitization powering emergence of new India
In a positive development, the survey reveals that rural India is accessing the world by leveraging technology from the comfort of their homes, with 64% of rural respondents using mobile phones for engaging in social media messaging/chatting and 58% using phones to watch movies or videos.
However, only 17% use phones for online financial transactions, highlighting that better measures are needed to build digital financial awareness and uptake in India’s rural regions.
Commenting on the same, Prashant Tripathy, MD & CEO, of Max Life said, “India is taking positive strides towards more inclusive development, and the focus on building rural economy is becoming more imperative. While the life insurance penetration in India remains low, this study has helped in identifying the gaps and opportunities for the life insurance ecosystem, and avenues to collectively work towards creating a systematic, scalable, multi-pronged approach that can empower the rural people to achieve their financial aspirations.”
The findings of the survey shed light on the urgent need to empower rural India to become better financially prepared. The survey has highlighted the need to bring in suitable products to enhance life insurance penetration in the country and bridge the urban-rural divide.