According to the Life Freedom Index (LFI) study conducted by HDFC Life, almost 90% of consumers have faced salary cuts or business losses to some extent due the effects of COVID-19.
The top three concerns raised by the respondents in the study - economic slowdown, job insecurity and fear of debt due to lack of income – are driving low confidence in terms of financial preparedness, as per the study.
Vishal Subharwal, Head – Marketing, Digital Business and E-commerce, HDFC Life, said, “Life Freedom Index is our barometer for measuring the levels of financial awareness, the planning and the adequacy of the plan. Over the last few years we have seen changing trends.”
In 2021, the LFI has seen a drop of 4.8 points vis-a-vis that of 2019 indicating the impact of COVID-19. Consumer confidence has been low post the two waves and there is a general consensus that current financial planning has been inadequate. Hence the most significant drop is observed in the financial sufficiency and adequacy index.
Commenting on the drop, Subharwal further added, “What makes the report different this time is the pandemic and its impact on consumer confidence. The 4.8 point drop in the index indicates that the health pandemic has turned into a financial concern with various challenges surfacing.”
He also added that better financial planning with life insurance has emerged as the need of the moment and he hopes that individuals with responsibilities will see value in securing themselves financially thereby protecting their families from unforeseen events.
The 2021 LFI study was conducted along with Nielsen IQ across 14 cities (including Metros, Tier 1 and Tier 2) with 1987 respondents. The impact of COVID-19 is more severe across metros in comparison to Tier 1 and Tier 2 cities. According to the report, financial awareness has increased during the last two waves. 41% respondents shared that they availed a life insurance policy post the first wave that enabled them to plan better for the second wave. Hence, it would be interesting to see how the consumers will be looking to empower themselves with a better understanding of financial planning in future.