- Egypt may become the first country to make Divorce or Alimony insurance mandatory. Developed countries including US and UK already offer such products. The increasing divorce rate in India presents a case for introduction of Divorce or Alimony insurance in India.
- The notion that marriage is between families and not individuals is still prevalent in India. From family reputation to ‘log kya kahenge’ stigma, the concept of divorce is not yet embraced in our society.
Census 2011 results
- Based on the Census 2011- out of the total females who have been married atleast once , 4% represents women currently under age 19. Proportion of female population under age 19 was 41% and 18% was represented by age groups 20-29 ( around 10cr female).
- There is adverse sex ratio, meaning there are more men in any age group than females.
- To get a sense of marriage age- about 91% of all married women in the country tied the knot before they were 25 years old.
- In States like Bihar, Madhya Pradesh and Chhattisgarh more than 70% of all married women tied the knot before they were 19 years old. The following map represents the married proportion under age 19 by state.
- The median marriage age has increased over the years ( from 16-17 for those married for over 40 years and above , to 18-19 for those married 0-4years ago).
- Around 9 lakh women are divorced based on the Census 2011 data. This is equivalent to 0.3% of the total married population.
- The number of women separated is more than twice the number of women divorced. It represents 0.8% of total married population. The higher separation rate than divorce gives an indication of the slow moving court cases and also the stigma associated with divorce in India.
- Divorce/Separation rate in India is 1% . The following graph provides the relativity of the divorce/separation rate for each state compared to the national average. Meghalaya, Manipur and Mizoram represents the highest rate of divorce/separation followed by Kerala and Chattisgarh. On the other hand, owing to patriarchy society UP ,Bihar, Haryana and Rajasthan have the lowest divorce rate.
- The low divorce rates currently suggest women are not able to speak against their families or are not in a position to support themselves financially. Other possible reasons are no access to legal assistance or domestic abuse. Divorce rate for couples with children may decrease.
- Religion can also impact the divorce rate. Hinduism is the dominant religion in India and marriages are considered sacred in Hinduism.
- Looking at the proportion of females currently married to the females ever married, we observe that the decrements ( either due to divorce or separation or divorce) are highest for age of marriage between 12 to 17.
- Adultery and incompatibility are the two common reasons that are cited for divorce. The growing divorce rate also points to the erosion of traditional family structure. Other common reasons for divorce are as follows:-
Cruelty including demand of dowry, threat to commit suicide, drug addiction
- In US the median duration of first marriages that end in divorce is 7.9 years for females.
- The financial situation of the family can also affect the divorce/separation rate. 5.87 crore income tax returns were submitted as per the income tax statistics ( a very small proportion of the total population of more than 130 crore). On the basis of this data median income in India is INR 3.5 to 4 lakh.
- In India, if there is significant difference in the earnings of the women and her husband, alimony is granted. Women’s age , qualifications, ability to earn are considered to decide the alimony amount.
- Section 125 of the Criminal Procedure code is a secular provision, under which a wife can claim maintenance no matter what religious faith she follows. However the woman litigant needs to demonstrate that she is unable to maintain herself
Monthly Payments vs Lumpsum–
- Monthly alimony is capped at 25% of husband’s gross salary. It is changed as per changes in husband’s salary.
- Lump sum settlement ranges from 1/5 to 1/3 of husband’s net worth.
- Child support maintenance is to be provided separately by the father. Working mothers will also have to provide. This amount could be used to support child’s marriage or education.
Mutual consents divorce takes around 6 months and contested divorce takes around 5 years. Less than 20% of divorce cases are resolved with mutual consent. The average cost of divorce by mutual consent is somewhere from INR 30,000 to 60,000.
For the contested divorces, most are settled out of court due to long wait for obtaining a divorce. Contested divorces can be expensive due to the long time in resolution.
A possible structure for insurance policy to cover the cost of legal proceedings.
- Fixed benefit for legal costs equal to 3 times annual premium (increasing at 5% per annum from year 3 onwards) payable on finalization of divorce.
- Premium to be paid for 2 years and if divorce happens in first 2 years refund of premium.
- Policy term of 10 years.
The benefits can be combined with the goal based ULIP policies for children ( education/ marriage etc).
Alimony benefit incase of divorce based on the net worth of man and earnings of couple.
Some further points to consider
- Deal with cases of divorces that are filed deliberately to obtain compensation( fraud, moral hazard)?
- Pricing and product structure for the lower percentile of income distribution.
- Census 2011 data is outdated and may not represent the current trends. Also the women may not report divorce/ separation due to stigma attached to it.
- Low uptake due to stigma associated with divorce.