A Behavioral Study of Life Insurance Purchase Decisions
January 10, 2022
The insurance market in India is highly concentrated with the Life Insurance Corporation of India (LIC) having more than 70% of the market share. High levels of financial illiteracy lead to significant information asymmetry in the market. Many households lack access to the formal financial sector and do not have bank accounts. In this context, insurance agents are often the only source of information. Insurance is often perceived as an alternative investment option even though the returns from this mode of investing may be less than optimal. A 2014 study estimated that the loss to the consumer from lapsed insurance policies between the years of 2004 and 2011 was about $ 28 billion.
