Rural India’s insurance penetration is abysmally low compared to Urban India and a stark Urban-Rural divide has been revealed in the findings of the first-ever rural edition of Max Life Insurance’s India ProtectionQuotient survey (IPQ).

Speaking to businessline on the findings of the IPQ5.0 Survey as regards rural India, Prashant Tripathy, Managing Director & CEO, Max Life Insurance said that rural India scored 12 points on the protection quotient scale, compared to 43 points achieved by urban India in IPQ 5.0 (conducted in November- December 2022).  There is a large gap in awareness and ownership of insurance products in rural India, Tripathy said, adding that the insurance industry needs to work closely to up its game in rural India.

The life insurance ownership gap is more pronounced with only 22 per cent of India’s rural population owning Life insurance products, compared to 73 per cent across urban India. The low uptake can be primarily attributed to inadequate funds to buy life insurance (41 per cent), high premiums (32 per cent), and multiple buying formalities (24 per cent).

This ownership and awareness disparity also highlights the urgent need to empower rural India’s households to become better financially prepared. 

Identifying gaps

While governmental push for ‘Insurance-for-All’ via schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Saral Jeevan Bima, and Pension Yojana, and the same have seen greater success, experts feel it is through an effective public-private partnership that life insurance penetration can be enhanced in the country.

The survey highlighted 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 gap in financial security between urban and rural India was not as stark as other metrics, with security levels in rural India at 38 per cent as opposed to 63 per cent for urban India, indicating a respectable security outlook across the country.

The rural edition of IPQ 5.0 was conducted across 113 villages, in association with KANTAR. Nearly 740 rural households were involved in the survey.

“Life Insurance penetration is low in rural India because awareness is low. This is because people don’t even think about insurance. That’s not big part of their consideration”, he said.

Also read: Term insurance: why short could be sweet

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.”

Term insurance

On awareness of term ownership, Tripathy said that term awareness in Urban India is 64 per cent and 32 per cent in rural India while ownership is 12 per cent. “So 12 per cent in itself looks reasonable versus 30 per cent in Urban India, but of this 12 per cent as much as 10 per cent is accounted for by PMJJBY. PMJJBY has done a reasonable job is the way I will put it. On savings also ownership levels are quite low at 9 per cent. So I think things have not reached the rural areas”, he said.

The survey reveals insights into the financial preparedness of India’s rural population, shedding light on gaps seen between the urban and rural regions of the country, and the opportunities for boosting financial preparedness.

Accessing the world from their homes

In a positive, the survey reveals that rural India is accessing the world by leveraging technology from the comfort of their homes, with 64 per cent of rural respondents using mobile phones for engaging in social media messaging/chatting and 58 per cent using phones to watch movies or videos. 

However, only 17 per cent use phones for online financial transactions, highlighting that better measures are needed to build digital financial awareness and uptake in India’s rural regions.