Bridging India’s Life Insurance Protection Gap
A recent study by Bajaj Allianz Life Insurance and NielsenIQ reveals significant trends and challenges in India’s life insurance sector. The average age of first-time life insurance buyers has dropped from 33 to 28 years, driven by increasing family responsibilities, rising income levels, and growing health concerns. However, despite this positive trend, a substantial protection gap remains in the country.
The study highlights that while 81% of respondents believed that life insurance coverage of less than 10 times their annual income was sufficient for financial security, the actual coverage figures tell a different story. In urban areas, the average life cover stood at only 3.1 times annual income, dropping to 2.9 times for mass affluent and affluent families, respectively. This underinsurance is particularly concerning given that India’s total sum assured is just 70% of GDP, significantly lower than countries like the US (251%), Thailand (143%), and Malaysia (153%).
The consequences of this underinsurance can be severe, forcing families to dip into savings or liquidate assets during crises, potentially derailing their life goals. To truly safeguard their loved ones, individuals must assess their coverage needs holistically, considering income, liabilities, and future aspirations. A simple rule of thumb is to have life cover at least 10 times one’s annual income.
Other key findings from the Underinsurance Survey 2025 include:
- Perception vs. Reality: Indians believed they had coverage of 6.4 times their income, but actual coverage averaged just 3.1 times, highlighting a major gap in financial preparedness.
- Lack of Coverage Reviews: Over one in three Indians have never reviewed their life insurance coverage, even after major life events. This number rises to 43% among self-employed and affluent individuals.
- Confidence in Coverage: The 46-50 age group expressed low confidence in their sum assured, reflecting ongoing uncertainty about coverage adequacy.
- Source of Information: Around 46% of Indians rely on personal research for life insurance decisions, emphasizing a preference for self-directed learning.
To address these challenges, sector analysts emphasize the need for continued efforts to drive awareness, enhance product transparency, and improve accessibility. A robust digital and tech-enabled service ecosystem will be crucial in bridging this gap. By working together, the insurance sector can move closer to achieving the vision of ‘Insurance for All by 2047’.
The survey’s findings underscore a critical gap in life insurance awareness and adequacy in India. While more people are recognizing the importance of life insurance, misconceptions about required coverage persist, leaving many underinsured. The insurance sector must continue to innovate and adapt to meet these challenges, particularly through the adoption of digital technologies that can enhance accessibility and understanding of insurance products.
