1. Source: The Marketing White Book 2009 -2010, Businessworld Financial Insecurity In India February 19, 2009

2. 1 I.Max-NCAER Survey II. Financial Vulnerability III.Average Surplus Income III.Poor Long-term Financial Planning IV.Long-term Investment Avenues V.Indebtedness In India VI.Not Prepared For Risk Management Sample Table of Contents

3. 2 Max-NCAER Survey 2008: How India Earns, Spends & Saves Study conducted by Max New York Life Insurance & the National Council of Applied Economic Research (NCAER) Objective: Establish how aware Indians are about risk and how do they plan for risk management in the long- term with extensive and concrete data-based evidence Conducted through 2005 & 2006 Covered 63,016 households 70% households from rural India & 30% from urban centers Some Conclusions: Households earning less than expenditure levels – 25% (51 million households or 262 million persons) Households that can’t survive for more than 1yr on their current savings if major source of household income lost – 96% A financially secure country cannot be built on the base of a small proportion of financially secure households.

4. 3 Financial Vulnerability Financially Vulnerable – Significant mismatch between income & need-based expenditure levels. Average income of vulnerable households – Rs 40,450 p.a Average income on non-vulnerable households – Rs 73,082 p.a Average deficit of vulnerable households – Rs 24, 967 Average surplus of non-vulnerable households – Rs 30, 036 Average household: Annual Income – Rs 65,041 Annual Expenditure – Rs 48,902 Annual Surplus – Rs 16, 139 left to Save & Invest Annual saving – Rs 11, 613 Urban income level is 85% higher than rural income Urban saving is nearly double that of rural household (Rs 26, 762 p.a) Expenditure of households varies according to need and, therefore income levels do not translate directly to the levels of vulnerability. Households in higher income groups are also financially vulnerable.

5. 4 Average Surplus Income In Indian Households Estimates of Surplus Income, Investment & Savings

6. 5 Poor Long-term Financial Planning Some astonishing findings about Indian households: 81% save 36% keep savings at home – as cash! What does the India household save for? Primarily for emergencies – 83% Children’s education & inheritance – 81% Old age – 69% Weddings & other social events -63% Buy or build house – 47% Improve or expand business – 47%

7. 6 Long-term Investment Avenues Where does the India household put in its savings? Large no. of the sample - Keep it at home (includes 20% of salary earners) Over 50% keep their savings in banks 5% save in Post Office accounts 3% in cooperative societies Less than 3% buy into bonds & other financial instruments There is little correlation between savings & long-term gain. With such poor focus on long-term financial planning, it is not surprising that indebtedness is high.

8. 7 Indebtedness In India How bad is the indebtedness around us? 40% of rural households in debt 25% of urban households in debt 10% in the lowest income group in urban India saves nearly 6% of income while incurring a deficit (income – expenditure) of Rs. 9,500 p.a 10% in the lowest income group in rural India saves nearly 3% of income while incurring a deficit (income – expenditure) of Rs. 6,000 p.a 36% of respondents had no idea about finding alternate income source if major household income source was lost (due to job loss, death or disease).

9. 8 Not Prepared for Risk Management Insurance ownership LOW 24% households own life insurance Only 1.2% families have health insurance Ownership of health insurance in metros is a mere 3.9% Average Sum Assured for households with life insurance is just over Rs. 1lakh Spend on healthcare – 4.65% of income Health-related shocks deplete savings upto 9% & increase indebtedness by as much as 5% Insurance is related to economic growth. A nation that is aware of, plans for, and manages risk, paves the way for economic growth. Poor risk management reduces growth to matter of mere chance & good fortune.

10. 9 Need For Long-term Financial Planning Insurance helps household to weather financial ups & downs Insurance is a means for long-term planned growth and not a tax-saving measure. Insurance is essentially a risk management tool Increased ownership of insurance is indicative of a risk-management culture – a prerequisite for the economic growth of business, individuals and households Financial literacy is extremely low in India Tremendous scope to educate households on long-term financial planning & risk management Huge opportunity to direct the saving potential of households into right investment avenues A culture of miniscule long-term financial planning and poor levels of financial literacy comprise the core of India’s financial insecurity.

11. 10 Thank You