With 47% below 35 years of age, banks gear up for 'millennial' account

Millennials constitute 47% of the country's working population and will be the primary contributors to economic growth

With two-thirds of the population below the age of 35, financial institutions like insurance companies and mutual fund are on the cusp of a great opportunity to pool-in “millennial” savings on the one hand and offer insurance and investment options in return. 

Millennials constitute 47 per cent of the country’s working population and will be the primary contributors to economic growth whether as consumers, entrepreneurs or investors.  However, in the interest of capitalising on this insurance companies need to become more flexible and adaptive to the needs of this generation of customers, recommends a report by ASSOCHAM and IndiaFirst Life Insurance. 

The survey received closed to 1,000 respondents from across Maharashtra and are from varied socio-economic and culture background, says the report. 

Around 63 per cent of the respondents are earning, 70 per cent are single and in terms of employment 32 per cent work in the private sector as salaried employees, while 10 per cent work in Government and a substantial 28 per cent of the respondents are job seekers. 

Nearly 60 per cent of respondents save less than 10 per cent of their earnings or have none at all, which is indication of their aversion to buy financial investment products. 

“If we look at the values, monthly savings of majority of the respondents are a little over Rs 2000 This indicates a shift towards the consumption economy, thus deviating from the previous generations’ gradient for savings,” states the report. 

Table 1 displays the total annual savings of the individual as a percentage of respondents. 

Annual Individual Savings Rs	Percentage of Respondents
Less than 25,000	60
25001-50000	20
50001-100000	12
100001- 200000	3
200001-500000	4
Above 500000	2
Source: White Paper by IndiaFirst Life Insurance and ASSOCHAM

One recommendation based on the feedback received from the respondents is “to launch new products offering the flexibility of premium payment if possible,” with an option for customers to pay premium when feasible therefore having gaps in their premium payments. 

Table 2 shows the investment preferences of the respondents.

Preferred Investment Instrument	Percentage of Respondents
Mutual Funds	69
Life Insurance	70
Fixed/Recurring Deposits	64
Pension Funds	39
Stocks and Equities	46
Gold and ETFs	35
Real Estate	26
Source: White Paper by IndiaFirst Life Insurance and ASSOCHAM

According to the survey the top two preferred choice for investments were mutual funds and life Insurance, with gold, bonds and real estate being the least preferred. This marks a significant shift in the preferences of customers as compared to older generations

Another important finding is that half the responds said that would only stay invested in a product for a maximum of five years, while only 17 per cent were willing to invest in a long-term product of  10 or more years. Around 83 per cent of the respondents would prefer investing in short-term or medium-term products. 

The survey found that a staggering 80 per cent of the individuals do not plan for investments even though their top priorities when it comes to investments are ‘protecting their family’ and ‘fulfilling lifestyle needs.’

While the report says that insurers “need to bridge the disconnect between people demanding a short-term product and industry propagating a long-term product,” the real issue is not the lack of education about long-term investment and savings but that the ‘time-horizons’ of millennials has greatly altered.