From SIPs to Skip: Why Life Insurance Isn’t Clicking with India’s Yo

Life insurance is falling out of favor as a vehicle for savings among young Indians, with recent RBI and industry reports indicating that its proportion of household financial savings continues to fall—although overall savings increase. Once a mainstay of financial security, it is being increasingly replaced by more liquid and more remunerative investment options.

 

Key Highlights

 

Perception Problem: The majority of millennials and Gen Zers view life insurance as a cost burden, not a necessity, overestimate premium cost, and prefer to spend money on immediate expenses or investments with more timely returns.

 

Delayed Responsibility: Young Indians, with no responsibilities or major liabilities, believe they have "more time" before insurance kicks in, leading to delay and low take-up.

 

Investment Shift: Mutual fund growth, SIPs, and online investment platforms offer more attractive, liquid, and transparent products, drawing young people away from traditional insurance products.

 

Awareness Gap: There is a general unawareness of the dual purpose of life insurance—protection and saving—aggravated by the myth that it's too complex or not needed at a young age.

 

Underinsurance: Even policy buyers tend to underrate the coverage required, putting families in a financially exposed position while feeling secure.

 

Prospect: Unless insurers innovate and respond to the shifting desires and spending patterns of India's youth, life insurance can remain a losing bet as a preferred savings tool in the years to come.

 

Source: Business Standard