By Supriya Rathi – Wholetime Director, Anand Rathi Insurance Brokers Pvt Ltd.
As per the latest Swiss Re, total insurance penetration in India is 4.2%. To put this in perspective, the world average of insurance penetration is 7.3%. In developed countries such as UK, it is 11% and USA at 12%. In this metric we are far currently far behind even regional counterparts, such as Malaysia and Thailand.
Penetration in the life insurance industry in India is at 3.2%, at par with the global average of 3.3%. For the non-life sectors the figure is very low at just 1 percent as against the global average of 4%.
The Development Role of the Regulator
Insurance as a sector is seminal to the growth of the overall economy. IRDAI’s clear mandate for the non-life insurance industry is to increase the general insurance penetration to 2.5% by FY27 from the current 1%. To this end, the regulator is proposing widening the scope of distribution channels, ease in new product filing and adoption of technology across the value chain; all of these recent initiatives are a welcome move towards the IRDAI’s target of insurance for all by 2047.
Insurance Awareness and education
The awareness about Insurance continues to be very low in India. All stakeholders, insurers, regulator, intermediaries need to drive awareness through various initiatives such as digital marketing and traditional media channels. AMFI, the mutual fund regulator ran a successful campaign : Mutual Fund Sahi Ha, which helped increase the awareness of mutual funds as a saving tool. Similar awareness initiatives for insurance must be implemented by stakeholders.
The insurance industry benefited from the Pandemic’s impact on risk awareness; insurance companies therefore must leverage this opportunity to make deeper inroads into the Indian market.
Driving Distribution of Rural Insurance
In order to increase the insurance penetration in India it is very important that the uninsured rural areas and the urban poor must be brought under the ambit of insurance coverage. Insurance companies will need to design innovative cost effective insurance products which are suitable to that market. A combination of online sales as well as physical deployment of agents through CSCs, post offices needs to be explored. Here the NGO/ social sector collaboration would also be an efficient way to tackle the last mile connectivity in rural areas.
Product innovation, Cost effective offerings
IRDAI has introduced “use & file” procedure for almost all non-life insurance products and some life insurance products. Insurance companies will have to design new and innovative retail insurance products which are simpler and cost effective.
IRDAI should allow wider insurance products to be sold on the PoSP platform which will lead to increasing insurance awareness and penetration. Insurers should innovate small-ticket insurance products and ensure that innovative and affordable policies are available to a wider audience. Good examples of such products would be Individual Cyber, Pet/cattle Insurance, Loss of livelihood Insurance, Local Travel Insurance, Laptop & Mobile Insurance, Hospital Cash Insurance among many others. Such products can be tailor-made as per the needs of individual retail consumer so that Indian consumer are gradually introduced to the idea of insurance and start seeing the benefits.
Technology & Innovation
The Insurance industry in India is fast evolving, with a large impetus coming from digital transformation and big data. Currently, there are over 150 InsurTech start-ups operating in India. Usage of technology in intimation and settlement of claims is simplifying processes and reducing TATs, which will infuse more confidence with the consumer. Machine Learning can bring huge efficiencies in operations and grievance mechanisms of insurance companies, minimise claim frauds and automate settlements. Over the next few years, the use of technology across the sales cycle of insurance policies will transform the industry and play a major role in increasing insurance penetration.
Government Sponsored Insurance Schemes
The government’s Pradhan Mantri Jeevan Jyoti Bima Yojana, Aayushman Jan Arogya Yojana, Fasal Bima Yojana and Pradhan Mantri Suraksha Bima Yojana are notable contributors in expanding insurance coverage in the country. Similar Insurance schemes for the low income households for their homes and vehicles will further propel growth.