Increased Financial Awareness Is Pushing Millennials To Invest In Life Insurance At An Increasing Rate

May 16, 2018 | 6 months ago | Read Time: 4 minutes | By Manan Vyas

The insurance industry in India is expanding rapidly, with a market of Rs 2.4 trillion, and a CAGR of premiums at 10.4% for the 2017 financial year, according to reports released earlier this month. The growth in the sector is primarily due to the innovative nature of products put forward by insurance companies using digital channels. At the forefront of this growth are the millennials of the country, driving the insurance industry to achieve new milestones, with their higher financial literacy and investment acumen.

Growth of the life insurance industry

A report published by PricewaterhouseCoopers and the Indian Chamber of Commerce entitled the ‘India insurance perspective’ highlights that the insurance industry has been the “forefront of economic development in India” with a CAGR of 7.2% for premiums over the past 10 years. Additionally, the report highlights that around 25% of the new customers now use digital channels and models to “understand and compare insurance products.”Gross Premium Written in India - Aegon Life iKnowledge

This growth has been substantially driven by the life insurance sector, which has reported a growth of 20% for overall annual premium, “with the help of both private players and the Life Insurance Corporation of India (LIC)” for the first half of 2016-2017.  This marks the growth of the market from $10.5 billion in 2002 to around $54.6 billion in 2016, showing the increasing rate at which people are running to insure themselves.

Attitude of Millennials

A global survey by the Standard & Poor’s Financial Services LLC (S&P) released last year highlighted that less than 25% of adults in South Asian countries are financially literate. Indians perform worse on the scale, with around 76% of its adult population not having any idea about financial saving, insurance and security. However, these figures change drastically when we talk about millennials (people born between 1980-2000), who are much more financially responsible than older generations about planning their financial future and insuring themselves.

A study conducted last year to analyse the investment and insurance patterns and attitudes of Indians revealed important information about preferences of millenials. The survey analysed information into two indices, with the Dream Index showcasing how aware people are of their life goals and the Plan Index showing their financial preparedness in achieving these goals. Millennials scored a whopping 31 on the Plan Index, which is six points more than the all-India score of 24, and way ahead of the 36-45 age group who only scored 16 in this indicator. They are also higher risk takers.

These figures showcase the ability of millennials to plan and secure their financial future better than any other generation in the country. Since the term millennials has become synonymous with technology and development, it is clear that the internet and digital channels are playing an increasing role in reducing financial illiteracy for the generation and prompting them to make wiser financial decisions, including investing in life insurance.

Looking forward

By 2022, India is expected to become the youngest country in the world, which has significantly increased the market for life insurance in the country simply by increasing the number of insurable young population. Additionally, millennials are currently in their big spending phase, due to which their spending patterns and attitudes vastly impacts business decisions and marketing. Insurance companies seem to have adopted this into their agenda, and many are resorting to digital channels to promote their products, to improve insurance penetration in the country. Furthermore, the risk-taking appetite of the Indian millennial has increased which is where automation comes into play, and enables insurance companies to use real time data and analytics to help consumers mitigate risks.

Media reports showcase that millennials prefer to invest into a life insurance company that helps them mitigate risks rather than just calculating risks for premium evaluation. As per the PwC report on the insurance industry in India, companies have been increasing investment in Robotics Process Automation (RPA) and automated and augmented underwriting to build more accurate platforms and models, and increase efficiency, thereby, giving the millennials what they want.

Additionally, there is a huge untapped market in the country, as India’s sum assured-to-GDP ratio, which is considered to be a critical measure of insurance protection in an country, is much lower than its counterparts’. Experts opine that this indicates there is potential for significant growth in the industry, which will drive growth of life insurance products fuelled by a number of factors, including, growing urbanisation and influence of millennials in the economy. The life insurance industry in India is predicted to grow by 2-2.5 times by 2020, due to the coupled impact of a “young insurable population” and the growing “awareness of the need for protection.” Millennials will continue to push for innovation and digital transformation of the industry ensuring that the current surge in demand for life insurance is sustained.


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