Rising household consumption, medical and educational expenses top concerns of Indians: SBI Life study

According to the SBI Life study, 96 percent of employees covered solely under employer-provided insurance are underinsured

The increasing cost of items of day-to-day consumption is a top concern for Indians, followed by the rising medical costs and education expenses, according to the third edition of the Financial Immunity study conducted by SBI Life Insurance.

Close to 43 percent of the respondents ranked increasing cost of daily consumption items as their topmost concern. “A sizable proportion of 43 percent of consumers now consider inflation as their crucial concern in today’s economic climate. It is also noteworthy to highlight that inflation and increasing costs of daily items were rated as the lowest concern for consumers during the Financial Immunity Study 2.0,” the report notes.

While the field work for the third - and current - edition of the survey was conducted in June 2023, the previous edition's groundwork was completed in October-November 2021.

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Inflation is India’s topmost concern

Increasing medical costs (36 percent), rising cost of education (35 percent), possible recession and its impact (27 percent), poor mental (24 percent) and physical (24 percent) health status, besides job loss (23 percent) and the inadequacy of life/health insurance (19 percent) are the other causes of concern for Indians.

The survey, conducted in partnership with Deloitte India, polled over 5,000 respondents across 41 cities and towns in the country.

According to the study, the respondents polled are taking active steps to brace themselves for these challenges. “On average, 52 percent of the annual income of Indian consumer households is allocated towards strengthening their financial immunity. This allocation is 17 percent towards savings, 16 percent towards financial assets, 11 percent towards life insurance, and 8 percent towards health insurance policies,” the report says.

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Those surveyed in the third edition of the study define financial immunity as their ability to maintain financial security, generate income in difficult times, have multiple sources of income, have job security and business income foresight, live dreams without compromises and live without reliance on loans. “Since the inception of the Financial Immunity consumer studies, the prevailing definition of financial immunity has remained to be maintaining financial security and stability,” the study says.

The survey asked respondents to rate their financial immunity level on a scale of 1 to 10, with 10 being the highest. Those in their 30s gave themselves the highest score (7.2), followed by individuals in their 40s (6.9), with those in their 20s considering themselves to be least financially immune (6.6).

Financial instruments top choice to achieve immunity against financial uncertainties

To achieve financial immunity on the basis of these goals, Indians are investing in mutual funds and equities while managing expenses effectively (49 percent), creating secondary sources of income (41 percent), purchasing or increasing life as well as health insurance coverage (37 percent) and purchasing gold (35 percent).

Overall, surveyed consumers rated themselves around 70 percent financially immune to unforeseen and adverse circumstances. “However, surveyed consumers who possess an insurance policy (life or health) rated themselves higher, compared with those who do not possess insurance, by nearly 11 percent,” the survey says. That is, insured respondents (with life and health policies) gave themselves a financial immunity rating of 7.4 out of ten, while uninsured respondents assigned themselves a score of 6.3 out of ten. The average score was 6.9.

High on insurance purchase, low on coverage

Indian financial consumers do recognise the importance of insurance, especially post the COVID-19 pandemic. However, according to the survey, many seem to think merely owning an insurance policy guarantees adequate protection.

“Although 68 percent of surveyed consumers believe that they are sufficiently insured, only 6 percent of consumers are in fact sufficiently insured under their current insurance policies,” the report states.

A large majority – 75 percent - indicated that they owned some form of insurance coverage. Savings plans stood out as the most popular product category, with nearly 50 percent of the respondents owning a savings plan. “The popularity of savings plans can be attributed to their tax savings benefits and the assurance of guaranteed returns upon maturity,” the survey says.

Despite the fact that a term insurance policy can provide a large protection cover at the cheapest rates, it’s ranked behind savings plans on the list of most preferred insurance plans with 39 percent of respondents owning these plans. Child (28 percent) and retirement policies (26 percent) - which also come embedded with a savings element – are third and fourth on the preferred policies list.

Also, a large number of respondents are inadequately covered, partly due to the assumption that their employer-funded group cover is sufficient for their needs. “Nearly 68 percent of surveyed consumers that benefit from employer-provided coverage express confidence in the amount of insurance they have. However, it is observed that 96 percent of employees covered solely under employer provided insurance coverage are underinsured,” the study says.