RESEARCH

REPORT

A PRESENTATION OF RECENT LEARNINGS FROM USERS IN LIFE

INSURANCE, RETIREMENT PLANNING AND REAL ESTATE

CONTENTS

4
5
6
10
14
17
18

WHO WE ARE

ME THOD OLOGY

FINDINGS : LIFE INSURANCE

FINDINGS : RETIREMENT

F I N D I N G S : R E A L E S T AT E

SIGN OFF

DISCLAIMER

WHO WE ARE?
Personal finance is unique in that ones decisions can have a huge impact
over a long period of time. A pricey house, an under-insured family or goals
that one did not plan adequately for, can play out long after the purchase
decision was made (or not), and hence deserves far more attention than it
often gets.
BigDecisions.in helps retail users make smarter and more informed financial
decisions by providing a free platform comprising informative videos, data
backed financial calculators and other content that can be used as a starting
point for decisions that have a big financial impact.
The current thought process centres around a product solution, rather than
having the customer at the centre of it all. We help in re-arranging this
thought process and bring focus back to the consumer. BigDecisions.in
decouples the core decision of what should I do from what or whom should
I buy from.

METHODOLOGY
We provide our users with a non-intrusive platform to access content and
mathematical calculators for evaluating their financial decisions. Once we
crossed the 50,000 user milestone, we decided to look closer at some numbers
around peoples financial decision making.
Our starting point was ~60,000 users across our six financial calculators. We
used algorithmic filters (listed below) to eliminate any invalid and test data from
the analytical data set.
Records used for testing the tool
Records that indicated non-use of the tool
Records where any single user input field was incomplete/ empty or incorrectly
entered
Records prior to December 2013 (prior to achieving the desired traffic volume)
Outlier data records
15,000 valid (complete and correct) records were identified. We selected data
from three calculators, each providing a comprehensive understanding of certain
aspects of financial decision making.
Life Insurance: ~3,000 unique users where data consists of :
a. Demographics (age, gender, family size, dependents, marital status, location)
b. Finances (income, expenses, debt/ loans, savings, employment status)
c. Aspirations (target spend plans for education/ weddings)
d. Expectations (salary increase, inflation, return on investments)
Retirement Planning: ~4,000 unique users where data consists of :
a. Demographics (age, gender, family size, dependents, marital status, location)
b. Expense categories
c. Expectations (inflation by expense category, return on investments)
Real Estate - choose between buying & renting: ~4,000 unique users where
data consists of :
a. Rental information (rental value, inflation)
b. Purchase information (area, price/ rate, financing, appreciation)
c. Location
Data records were classified into categories along demographics, finances,
aspirations and expectations. We extracted views based on the classifications
above, which helped understand trends and correlations prior to publishing our
insights.

RESEARCH FINDINGS

LIFE INSURANCE
`

35
-4

0
la
`3
kh
p.
0a
35
lak
hp
`2
.a
530
lak
hp
`2
.a
025
la k
hp
.a
` 15
-20
lakh
p. a
` 10-1
5 lakh

p. a

FINDINGS ON THE AGE GROUP OF 30-35 FOR DIFFERENT INCOME BANDS

314.7 lakh

40.5 lakh
168.2 lakh

54.9 lakh
17.1 lakh

160.3 lakh
45.5 lakh

243.7 lakh

31.4 lakh

107.4 lakh
Rs.10-15
87.6 lakh
lakh/annum

25.2 lakh

INSURANCE NEEDED FOR EXPENSE COVER

EXISTING INSURANCE

FINDINGS ON THE AGE GROUP OF 35-40 FOR DIFFERENT INCOME BANDS

INSURANCE NEEDED FOR EXPENSE COVER

35
-4

0
la
`3
kh
p.
0a
35
lak
h
`2
p.
a
530
lak
hp
`2
.a
025
la k
hp
.a
` 15
-20
lakh
p. a
` 10-1
5 lakh

p. a

EXISTING INSURANCE

FINDINGS ON THE AGE GROUP OF 40-45 FOR DIFFERENT INCOME BANDS

111.0 lakh

40.9 lakh
127.6 lakh

53.4 lakh
58.7 lakh

84.0 lakh
160.3 lakh

40.7 lakh
147.7 lakh

34.4 lakh
26.6 lakh

96.9 lakh

INSURANCE NEEDED FOR EXPENSE COVER

p.

0
.a
-4
hp
35
k
`
a
5l
28.0 lakh
-3
0
p.a
3
kh
`
a
l
157.3 lakh
54.9 lakh
30
5.a
2
`
hp
la k
162.9 lakh
43.9 lakh
5
0-2
`2
164.2 lakh
38.9 lakh
p. a
lakh
0
2
` 15
131.0 lakh
37.8 lakh
a
kh p.
51-01.sR
-15 la
0
1
`
25.7
lakh
munna/hkal
101.8 lakh

194.8 lakh

kh
la

EXISTING INSURANCE

KEY TAKEAWAYS
UNDER-INSURANCE HAS BEEN AND CONTINUES TO BE A CONCERN IN INDIA.
As per the IRDA annual report 2012, life insurance penetration (or ratio of
premiums as a % of GDP) for India fell from 3.4% in 2011 to 3.17 in 2012. If you
compared ratios of protection where you compare levels of sum assured (or
actual amount of insurance) to GDP, the trends might be similar. Hence, the
growth in insurance premium is lower than the growth in national GDP, said IRDA
in its report.

If you compare the amount of existing life insurance against the additional life
insurance required for the family, in the case of the main earners death, to
manage expenses, you will find that across income and age bands, people
have nowhere near enough life insurance as needed.

KEY TAKEAWAYS
Contrary to popular perception, its not that the relatively lower and
middle-income groups have a greater problem of under-insurance. In fact, as
incomes go up, the amount of existing insurance cover grows at a much
slower pace than income growth indicating:
Higher income groups are likely to have higher expenses and, therefore, their
families are at higher risk of having to make drastic lifestyle changes in the
case of the chief earners death.

Even though premiums possibly increase (as evidenced by higher ticket size
from distribution channels like private and foreign banks) with higher income
levels, protection continues to remain a lower focus area and a larger portion of
the premiums seem to be going into savings products with inadequate
protection levels.

RESEARCH FINDINGS

RETIREMENT

Conventional financial planning suggests taking your current expense levels and inflating them by the prevailing
Consumer Price Index to arrive at expected expenses post retirement. The next step is to then arrive at a corpus or
sum of money that you need to put aside that will provide for the given expenses. However, the bigdecisions inflation
index or conflation as shown in the table below shows the more likely expected inflation levels in a given age band.

2.8%

09
years
50-55

14

3.5%

years
45-50

18

2.9%

years
40-45

23

3.5%

years
35-40

27

3.4%

years
30-35

30
years

3.5%
25-30

3.7%

33

years
20-25

EXPECTED
CONSUMPTION
INFLATION

YEARS TO
RETIREMENT
AGE GROUP

The methodology used to compute this index was to look at 20 years of daily expense data of a given household,
remove one-time expenses to arrive at how increase due to inflation, combined with reductions in consumption
impact the effective inflation rate for a household. These results are meant to be indicative and may vary across
different households.

KEY TAKEAWAYS
Indicates a much lower than expected inflation of expenses at retirement and,
therefore, a lower amount of savings and investments will help the familys
primary income earner to meet the goal.
Lets see how the 2 approaches differ for a 35 year old man who is the main
income earner of a family of 4 people, expecting to retire at the age of 60 and
whos current family expenses, including an EMI for their home (of ` 25,000), is
` 75,000 per month.
Conventional financial planning would suggest that the familys expenses would
inflate @7% a year for the next 25 years, resulting in their expenses becoming
a little over ` 4,00,000. Even if the family expects to earn a post-tax return of
8%, the primary income earner will need to plan to build a corpus of over
` 9 crore requiring him to save more than ` 90,000 per month.

Taking the BigDecisions.in index into account, the family can expect expenses to
inflate only at 3.5% per annum for the next 25 years resulting in familys
expenses being under ` 2 lakh per month. To prepare for this, the family will
need a corpus of under ` 4.5 crore and a monthly saving of less than ` 45,000
per month.

THE NEED TO START EARLY

25.0%

1,34,790
50-55

20.8%

1,03,085
45-50

23.5%

74,834
40-45

24.7%

67,249
35-40

38.2%

40,717
30-35

46.9%

27,253
25-30

AGE
MONTHLY SAVINGS
REQUIRED( in ` ) GROUP

PERCENTAGE OF
WORKING SPOUSES

KEY TAKEAWAYS
Theres a sharp drop in the percentage of double income families after the
main wage earner (the male head of the household in the case of our
visitors) turns 35 from almost half of all visitors under 30, to only one fourth
after 35. This impacts peoples lives in 3 ways:
The required savings to fund a comfortable retirement goes up dramatically
post age 35, from about ` 27,000 to over ` 67,000 and it only increases with
age.
A large number of people have only one income to save from.
Chances are, an increased family size that caused the spouse to stop working
also results in higher monthly expenses.

THEREFORE, STARTING TO SAVE EARLY WHEN YOURE STILL DOUBLE

INCOME WITH NO CHILDREN CANNOT BE OVER-EMPHASIZED !

RESEARCH FINDINGS

REAL ESTATE

KEY TAKEAWAYS
Our users used BigDecisions.in to evaluate/ validate their
house buying decisions compared to the possibility of
renting. In these cases, people were unable to compare an
under-construction propertys appreciation compared to
ready property and this therefore, is only a straight
comparison between buying or renting a given, ready to
occupy property. Some key messages coming out:
People expect property appreciation rates in the next
5-10 years to be well within single digits and feel the
doubling and even tripling every few years is a thing of the
past. This is not surprising since the countrys GDP growth
rates have come off our 8% and 9% highs to around the
5% mark.
At these appreciation rates, it could take anywhere from 9
to 12 years for a buying decision to make more financial
sense than renting the same property.

13
12

10.08 years

11
10

9.37 years

9.26 years

8.51 years

years to breakeven*

9
8

7.70%

7.20%
6.84%

7.08%

6.89% 6.77%

6.72%

6.47%

6
5

4.25%

4.12%

4.28%

3.93%

4
3
2
1
Mumbai

Bangalore

Delhi

Chennai

Property Appreciation

Years To Break Even*

cities

Rental Yield

Rental Inflation

* Period of stay required for buying to be the better decision.

While the sample size for users from smaller cities is low
and therefore not shown in the table below, relative to the
bigger cities people from these cities do expect a higher
rate of property appreciation.
An important implication for the professional migrant
population would be to seriously consider buying in cities
other than which they live in at the moment. Take an
example of someone from Surat or Trivandrum working
in Gurgaon or Mumbai. Our findings suggest that people
will benefit by renting in the city they work in (like Gurgaon
in this example) while buying (at a lower per-square-foot
rate) in their hometown (like Surat or Trivandrum in this
example) and can expect to maximize their benefit by
doing so.
12.38 years

10.01 years
8.93 years

8.42 years

8.32%
7.59% 7.45%

7.18%
6.78%

6.55%
5.62%

4.33%

3.64%

Pune

4.37%

4.23%

Hyderabad

5.14%

Gurgaon

Kolkata

cities

Rental Yield

Rental Inflation

Property Appreciation

* Period of stay required for buying to be the better decision.

Years To Break Even

TRULY SUCC ESSFUL

DEC ISION-MAKING RELIES ON A
BALANC E BE T WEEN DELIBERATE
AND INSTINCTIVE THINKING.

- MALC OLM GLA DWELL

SIGN OFF
Our users seem to confirm a larger trend thats been
playing out in the Indian context over the last decade. The
central theme seems to be a never before seen level of
dynamism in the financial and physical asset markets.
Real estate delivered phenomenal returns for many users
including the authors of this report. Yet, most of our users
expect single digit appreciation in the coming decade
making renting an apartment a better decision than
buying one for many. The life insurance industry has seen
lacklustre growth over the last few years and yet,
protection levels, though well short of where they need to
be have been climbing, if sales of online term insurance
trends are anything to go by. Equity markets seemed to
be going nowhere for several years until 2014, post which,
theyve started climbing steeply again while gold has been
steadily going the other way.
Our key learning has been that a one size fits all or expert
advice thats applicable to everyone, was never more out
of place. Outsourcing ones financial decisions entirely to
others needs to be replaced by consumers taking greater
ownership. This is especially necessary in the Indian
context where consumers expect great advice but remain
largely unwilling to pay for it. Simultaneously, there is a
dislike for the strong product push culture that has
pervaded asset product sellers because of commission
driven sales.
BigDecisions aims to play a part in building a better
ecosystem where consumers seek out solutions for
themselves. It will help deepen the market for essential
product categories and also help financial institutions and
real estate providers focus on developing and delivering
more of what consumers really need rather than pushing
aggressively what they have.

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