Insurance penetration low in urban areas

BANGALORE: Although there is an ever-growing army of agents, insurance penetration continues to be low even in urban centres. This was indicated by a recent analysis of tax savings by employees of IT/ITeS companies.

The survey conducted by wealth management firm Right Horizons has indicated that 41% of the respondents didn’t have any form of insurance cover. And what is worse is that the respondents aged between 21 years and 30 years form the bulk of India’s population.

The survey indicates that maximum insurance penetration was in the age group of 30-39 years (29%). Incidentally, the survey also indicated that 48% of the respondents didn’t have any medical/health insurance.

“Low penetration of medical insurance is surprising, given that tax benefit in the form of Sec 80(D) is available for this product,” said Mr Right Horizons CEO Anil Rego. The wealth management firm carried out the survey covering 1,000 taxpayers — mainly IT/ITeS employees — in Bangalore, Chennai and Hyderabad.

Typically, most of the respondents, who had a medical insurance cover, said it was provided by their employers while only 4% had invested on own accord. There has been a rising interest in health/medical insurance, with Budget-2007 increasing the limit to Rs 15,000 from the previous Rs 10,000 per year. ICICI Prudential Life Insurance has also jumped into the health insurance segment.

Another interesting pointer is the low penetration of other tax-saving products, with traditional products (insurance, NSC and PPF) dominating the preference.

Only 5% of the respondents said that had chosen to invest in equity linked saving schemes (ELSS) of mutual funds. But what is interesting is the fact that 30% of the respondents continue to depend on the provident fund (PF) for which they contribute, along with employers.

About 62% of the respondents said they had no investment in ELSS while 22% had made these investments. “The low penetration of ELSS among respondents clearly indicates that the mindset has not changed, with traditional products continuing to dominate investor preference,” Mr Rego said.