Tag: Financial Lives of Poor Households

In this deck, we discuss some factors influencing life insurance take-up, the problem with endowment life insurance for the low-income segment, and how better disclosures could be the first step in helping households choose the right insurance product for them.

The study explores the financial lives of platform workers and finding answers to the following questions: do platform workers face volatility in their income and expenses, and how much do their earnings and expenditures vary on a day-to-day basis; how long do they work to earn as much as they would like to; whether and where they save and borrow; what strategies do they adopt to manage their money to meet their day-to-day expenses, raise lump-sums, deal with and recover from shocks; what social protection benefits do they have access to; what their financial goals are; and what barriers exist, if at all, in their pursuit of those goals.

Insurance companies should align their sales practices to generate the best outcomes for low income households by ensuring easy access to a variety of products with disclosures that provide accurate information.

This blog post summarises key takeaways from a virtual workshop we recently hosted. It was conducted against the backdrop of a study that we recently concluded titled “Can information disclosures influence life insurance purchase decisions for low-income households?”.

There is a need for updated dataset on households’ consumption patterns, increased frequency of surveys on households’ balance sheet, and to collect data on financial well-being.

Unlike term plans that provide life risk cover or unit-linked schemes, where returns are market-linked, endowment plans offer maturity benefits upon survival & minimum guaranteed return.

Low-income households seek loans often, but credit is suitable if it helps sustain or improve financial well-being. This is what must be ensured by lenders, regulators & policymakers.

Low-income households work with irregular income inflows, resulting in shrinking financial planning horizon and necessitating frequent decisions in response to frequent changes.

Indian households and businesses hold their wealth primarily in physical assets like real estate, gold, and durables, while barely investing in any financial assets.

There are several reasons for low take-up of life insurance policies in general and specifically low take-up of term life insurance. These factors range from supply side barriers such as misaligned incentive structures for agents selling life insurance policies, lack of availability and accessibility to a larger suite of life insurance products customized to the needs of low-income households to demand-side barriers such as household’s contextual factors that limit their awareness and priority for a life insurance product and their behavioural preferences pertaining to life insurance products.