Urban India's Hidden Health Financial Risk: Uncovering Insurance Gaps

A recent report by BajajCapital Insurance Broking Ltd. unveils a concerning reality: 61% of urban Indian households are vulnerable to financial destabilisation from just one hospitalisation, even if they have health insurance. The report highlights a critical issue — the inadequacy of current insurance policies in truly meeting financial needs.

Financial coverage from average term insurance policies falls 30-50% short of what is needed for sustainable financial health, leaving policyholders underprepared during crises. This problem persists despite increasing digital literacy and the wider availability of insurance products, suggesting many Indians are merely one emergency away from financial peril.

The report's analysis spans five pivotal themes: the inflation-policy adequacy gap, Gen Z's hesitance in buying insurance, underinsurance among working women, the persistent rural-urban divide, and the role of AI in enhancing sector transparency. Notably, it sheds light on the underinsurance of working women, only 19% of whom possess life insurance in their name, despite their income contributions.

Furthermore, the study reveals that 61% of these policies are bought on behalf of women, indicating a pervasive lack of agency. Importantly, 64% of the surveyed women found the insurance landscape complex, underscoring the need for simplified processes and improved awareness.

Amongst Gen Z, aged 21-30, a significant disconnect between insurance awareness and action is evident. Although 83% actively research insurance, a mere 36% purchase coverage. This points to a perception of insurance as non-urgent, risking financial exposure during unforeseen health or life emergencies.

Higher-income earners also demonstrate a confidence-coverage gap, where income levels over ₹25 lakh annually provide a false sense of financial security, with insurance coverage growing only 2.5 times compared to a 5-8 times income growth. Many depend on employer-based group insurance lacking critical elements such as illness coverage.

In contrast, rural India grapples with low insurance awareness, despite initiatives like PMJJBY and PMSBY boosting policy uptake. Policyholders often remain unaware of the details, benefits, and claims process.

Sanjiv Bajaj, Joint Chairman & Managing Director of BajajCapital, emphasizes, 'Insurance is not about death or disease. It's about dignity.' Venkatesh Naidu, CEO of BajajCapital Insurance Broking Ltd., concurs, stating that while India is insuring itself, the pace and penetration are insufficient.

(With inputs from agencies.)