Sumit Madan, senior director and chief distribution officer, Axis Max Life Insurance, spoke on the need to prioritise insurance as the first financial product on one’s shopping list, at Outlook Money’s 40After40 Retirement Expo.
Sumit Madan, chief distribution officer, Axis Max Life Insurance called for prioritising term insurance as the first step in financial planning. He said 65 per cent of Indian households have only one breadwinner, which makes term insurance essential as without it, families could face financial distress
Sumit Madan, senior director and chief distribution officer, Axis Max Life Insurance, spoke on the need to prioritise insurance as the first financial product on one’s shopping list, at Outlook Money’s 40After40 Retirement Expo.
He said insurance should not be an afterthought, but rather the first financial product that people buy. He also expressed concern that despite rising financial awareness, India’s life insurance penetration has dropped to 2.8 per cent according to the annual development index (ADI) report, highlighting the urgent need for action.
He said many individuals prioritise real estate, gold, and mutual funds before considering insurance. However, this approach must change. “Do not look at insurance as the fourth or the fifth product you want to buy. Insurance, in fact, especially term insurance, should be largely the first product,” he said.
He pointed out that 65 per cent of Indian households have only one breadwinner, making term insurance essential. Without it, families could face financial distress.
Madan also addressed a psychological barrier. Many people avoid discussing death and financial risks, which prevents them from buying insurance.
“We have to make this entire discussion more financial. We’ve seen a lot of cases where families suffer financially when the breadwinner is not there. We understand the sentiments behind avoiding this conversation, but it is a reality,” he added.
While awareness about term insurance is increasing, actual purchases are declining. Madan pointed out the findings from the India Protection Quotient (IPQ) survey.
He said: “While the awareness has increased, people buying term insurance has actually come down. So that is a kind of a dichotomy.”
He also highlighted another study, saying, “Fifty-seven per cent of respondents mentioned that they have enough savings only to last the next 10 years. With life expectancy actually going up, you need to understand not only insurance but financial planning as a whole.”
A significant gap in insurance adoption exists in the corporate sector. Only 15 per cent of companies offer term insurance as an employee benefit, despite its affordability and importance.
Madan urged businesses to make term insurance a critical and urgent part of employee benefits.
“Our request to every industry at large is that please make term insurance an integral, critical, and urgent part of your employees’ benefits. That is the first step to start with,” he said.
Delaying the purchase of term insurance is one of the most common errors made by young professionals. Madan underlined that purchasing early guarantees long-term financial stability and helps lock in reduced premiums.
“Whenever my daughter, who is 20, starts earning, my first advice to her will be to buy term insurance. Life is uncertain, and the sooner you buy it, the better,” he said.
A common myth is that term insurance is expensive, but in reality, India has some of the lowest insurance premium rates globally. Madan said the “best of the plans will actually come at a cost of Rs 15-20 per day. It is still far more affordable to buy insurance in India”.
He also noted that digitalisation has improved accessibility, especially in Tier-II and Tier-III cities.
“Today, digital penetration is very good in some of the smaller cities. It shows that the reach of insurance can expand with better awareness and accessibility,” he explained.
Madan emphasised that reducing Goods and Services Tax (GST) on term insurance from 18 per cent could significantly improve adoption.
“The sooner the government takes a decision, the better. A lower GST rate will help broaden the entire base, making products far more affordable,” he said.