Low-income group women prefer savings account to insurance: survey

Women from low-income groups, who live in constant fear of an uncertain future, prefer to keep their hard-earned money in savings bank accounts rather than buy insurance policies, according to a survey.

The nation-wide survey, conducted by IndiaFirst Life Insurance (promoted by Bank of Baroda and Andhra Bank), covered over 5,000 low-income women. A majority of them (75%) in the age group of 26-41 years were seen putting their money in savings bank accounts while only 12% were found to be opting for life insurance policies. The respondents included daily wage workers, women working in the handicraft sector, domestic helpers, agriculturists, farm workers and small business owners.

The survey focussed on low-income women groups to understand their financial needs and habits, as well as financial behaviour with regard to savings and liabilities. The women said they prefer bank accounts as they want to withdraw their savings whenever they want to. Knowledge of insurance among them is still very low and they do not understand the difference between life, general or health insurance and the ultimate benefits.

The survey shows that 75% of farm workers take some kind of loan to meet their daily needs, and their aspiration is focused on monthly expenses such as rent, electricity bill, ration, fulfilling children’s demands, health of family members and children’s education. Nearly 20% of small-wage workers broke their savings to meet health-related expenditures. Saving for them took a huge effort as they earned just enough to survive, and most savings were spent on emergencies. Seven out of 10 women had a loan amount of less than ₹50,000 as they opted for micro-finances over seeking a bigger loan.

Many of the women sought an insurance product that enabled them to meet long-term goals. At least 65% of the women could save up to ₹100 a week to meet long-term family goals, while 30% would like to invest in an insurance product that assures return of the invested money in case no unforeseen event occurs. At least 17% said they would like flexibility to pay more and get their cover increased, while 12 % would like returns higher than what they invest. The respondents put great emphasis on the education of their children and sought long-term savings in the form of micro-insurance. Nearly 32% of them took loans for their children’s education and marriage, while 57% of farm workers believed in their child’s education and save for their children’s future.

“A lot more needs to be done to enable socio-economic empowerment of low-income women by promoting healthy savings behaviour and risk protection,” said R.M. Vishakha, MD & CEO, IndiaFirst Life Insurance Company Ltd.. “The target segment knows the importance of savings and investments. Over 80% of them have invested in some financial instrument either today or previously. There is a clear demand for a micro-insurance product, which is designed keeping in mind their specific needs,” she said.

These woman believe in microfinance as the documentation process is much faster and repaying is easier as compared to other loans. Their concern with bank loans is that they end up paying more than the actual amount, which they cannot afford for every need. Their ideal scheme should provide them flexibility to pay the premium or instalments and should not exceed a three-year term. Most respondents preferred a public sector scheme over a private one, and showed a higher level of trust in government institutions.

Source: The Hindu