Indians continue to severely underestimate the rising medical inflation and surging healthcare costs. Also, nearly 48% of health insurance policyholders in the country opt for coverage of INR5,00,000 ($5853) or even less according to a new survey by India's online insurance marketplace PolicyBazaar.com.
The 46-page second edition of the company’s consumer insights survey report How India Buys Insurance 2.0 published in April this year has revealed that 47.6% of Indians remain unaware of term insurance and its benefits. The report points out critical gaps in health and term insurance adoption, financial preparedness and risk perception—offering insights designed to help individuals make more informed financial decisions.
This comprehensive study based on pan – India responses highlights key gaps in financial preparedness and insurance adoption, offering critical insights for the industry.
Health insurance is now among top three ‘must-have’ financial products for 28.3% respondents. These respondents ranked health insurance above equities, mutual funds, and government bonds.
Indians continue to favour traditional financial investments such as gold, fixed deposits, insurance-linked savings schemes, and real estate. Health insurance has now joined this list.
Despite the increasing importance of health insurance, a significant number of policyholders remain underinsured. A staggering 75% of health insurance buyers in India have coverage of INR10,00,000 or less. The issue is most pronounced in South India, where 66% of policyholders have coverage of INR5,00,000 or less.
Non-buyers also display a severe underestimation of medical costs. About 51% of them believe that critical illness treatments, such as cancer, kidney transplants, or cardiac procedures, cost less than INR5,00,000 – which is far from the ground reality today.
The awareness gap remains one of the biggest barriers to term insurance adoption in India. The survey found that 47.6% of Indians are unaware of term insurance and its benefits. However, there are signs of improvement. Industry-wide, term insurance grew by 18% in financial year 2023-24, compared to a CAGR of just 2% over the past five years. The survey found that 56% of respondents who are aware of term insurance have a positive attitude toward purchasing it.
Many non-buyers fail to consider key financial factors such as child education, marriage, loan obligations, spousal retirement, and medical contingencies when evaluating their family's long-term needs. Experts recommend a life insurance cover of 15-20 times one’s annual income to ensure that dependents can sustain themselves for at least 10 years. Only 13% of non-buyers accurately estimate their insurance needs in line with expert recommendations.
PB Fintech joint group CEO Sarbvir Singh said, “A large proportion of consumers plan to sell ancestral assets or borrow money during a crisis rather than opt for simple, accessible solutions like health and life insurance to protect their families. As an industry, it's imperative that we strengthen awareness and improve the overall customer experience to drive broader adoption and ensure financial security for all.”
How India Buys Insurance 2.0 reaffirms a fundamental truth, insurance isn’t bought in India; it’s nudged. While the findings highlight persistent gaps in coverage and financial planning, they also serve as a wake-up call for the industry.