The government’s mission of universal insurance coverage, providing a safety net for each citizen, marking 100 years of independence aligns is critical to creating a financially inclusive India. While we are now the 5th largest country globally in terms of GDP, our insurance penetration is a 4.2% of GDP, significantly below the global average of 7%.
While both government and regulatory efforts have accelerated in the past few years to drive up insurance penetration, consistent efforts by all stakeholders: government, social non-profit organizations and the private sector are required; to expand the safety net the insurance industry provides to the economic fabric of the nation.
Building on Trust and transparency
The moment of claim is the moment of truth. Often the trust of policyholders is eroded when claims are rejected or delayed. Complex wording and legalese of insurance policy documents isa large deterrent when investing in an insurance product.
Insurance sales are intrinsically push driven and thus often prone to mis-selling. Simplified policy benefits, easy to access grievance mechanisms, robust and timely claims settlements are imperative to building consumer confidence in insurance products.
In November 2023 iRDAI proposed a initiative to simplify customer information sheets (CIS) for health insurance policyholders. The CIS is a simplified one pager containing key policy details.The initiative aims to simplify the legal jargon in policy terms and conditions. Rigour in adhering to transparent sales processes, self regulation, commitment of insurers and intermediaries to client centricity and good governance are a must to change customer perceptions of the industry and achieve its true potential.
Enhancing Insurance Awareness
The use of insurance as a risk management tool is important not just for the family unit but for the community at large. Covid-19 epidemic saw a significant increase indemand for insurance as consumers realized its utility in managing unforeseen risks. While the industry is witnessing double digit growth, awareness is still a large void.
Insurance and financial literacy should be incorporated as an integral part of school curriculums. Insurers, the regulator and industry bodies need to work on nationwide insurance awareness campaigns, akin to the mutual fund industry, these efforts need to be consistent, long term, with a commitment from all industry stakeholders.
Many government run schemes such as PMJeevanJyoti and SurakshaBimaYojanafor accident and life cover respectively are affordable simple, yet essential covers. Yet, the uptake on these covers has been sluggish as awareness is low. CSC 2.0 – Customer services Centres were introduced as part of Digital India initiative to enhance financial awareness across the country. Currently 5.78 lac CSC exist in India or which 4.6 lac are in rural areas. (CSC.gov.in Sep 2023 data). However, premium collection through this channel has been verylow because CSCs have low bandwidth to market insurance and are themselves lacking awareness of the covers and their benefits.
Also,there is lack of a compelling commercial proposition for insurers/intermediaries to sell these and many micro insurance products. Insurance viability rests on the law of large numbers, hence low participation is a double whammy, making such products unviable and hence undersold.
What is required is a coordinated consistentmulti pronged effort to increase penetration, active use ofsocial media, traditional media, promotional campaigns, inclusion of insurance literacy in school curriculums and digitization to enhance online distribution. Simplified CSC productsneed to be launched by insurance companies, covering risk of death, long retirement, property, motor, health. Currently there is lack of communication between Insurance companies and CSCs leading to awareness gaps. UpskillingVLEs, designing attractive incentive schemes and focus on employing more women would help broad base the service offering of the CSCs to increase penetration of insurance.
IRDAI initiative of BimaVistara and BimaVaahak will help to build on awareness levels. BimaVistara is acomprehensive bundled policy that covers life, health, property, and accidental death. It has defined benefits for each risk category and is designed for quick claim payouts without involvement of surveyors. Its simplicity and bundling of multiple risks in a single product is a step in the right direction, to facilitate ease of marketing and distribution.
BimaVaahakisan initiative at Gram Panchayat level for a women centric distribution channel. BimaVaahaks will educate women about the benefits of comprehensive insurance, particularly BimaVistara.
Embracing Digitization
India has ranked in last place of the 29 sample countries 9 of 10 years in the 2010-2020 period, based on a 2023 report by Swiss Re. India’s insurance regulatory authority has initiated several regulatory changes recently to raise the digitalisation in insurance. Digitalisation is critical to close the protection gap in insurance, creating operational efficiencies for insurers through better underwriting, data control and reduced costs of distribution. Increased efficiencies allow for finer pricing, which in turn improves affordability and hence drives increased uptake of insurance products.
The BimaSugam initiative by IRDAI is a digital platform that combines insurers and distributors. It would act as a single window for the policyholder to manage his/her insurance coverage. It will provide end-to-end solutions for the customers’ insurance purchase journey including purchase, servicing, and claim settlement. It will facilitate insurance companies to access the validated and authentic data from various touch points such as the nationwide death registry, online aadhar verification and other India Stack EKYC utilities on a real-time basis. The platform will be the interface for the intermediaries and agents to sell policies and provide services to policyholders, among others, and reduce paperwork, thus reducing entry barriers for intermediaries, providing plug and play access for on boarding clients and servicing them.
Increased digitalization, platform availability, insuretech solutions in claims, underwriting and product innovation and distribution will help leapfrog the industry.
Insurance Talent Management
Since privatization of the insurance sector in 2001, the number of companies in life, health and general insurance has grown from 5 to 57. The industry has struggled withhigh attrition and shortage of qualified specialists including actuaries, risk engineers, techno commercial professionals and even sales force. Insurance as a career is not a top choice for most youth. Hence demand for insurance specific courses has been tepid and as a result the insurance education infrastructure has not kept pace with the demands of employment in the sector.
Maximizing on the young demographic dividend that India possesses currently requires improving the reputation of the insurance industry as a career choice. It also calls for providing creative and broader opportunities for young people to engage in the insurance sector.
Addressing climate change
Globally, climate change has inflicted a population-weighted GDP loss of 6.3% in 2022. equivalent to approximately $1.5 trillion. India, third highest in carbon emissions and amongst the most vulnerable to floods and heat waves has lost close to 8% of GDP in 2022 due to climate change according to a recent report by University of Delaware. Research predicts that climate change could reduce India’s GDP by around 2.6% by 2100. This is especially challenging where general insurance penetration is only about 1% of GDP, far below global average. Low insurance penetration limits the insurer’s ability to spread costs across its customers and makes it hard for insurers to underwrite for the frequency and severity of risk.
Growing physical risks will influence the future availability and affordability of insurance capacity in India, making unviable the existing business models. Instead of continual premium increases, a collaborative approach to risk management between the insured and insurers to adapt and work on mitigation measures is essential.
The insurance industry needs to play a central role in accelerating the shift towards a more sustainable community. Insurers are not only protection providers but also as risk managers and advocates to educate and spreading awareness. Some of the initiatives in addressing climate change should be adoption of green loyalty programs, pay as usepriced products, premium discounts for electric/hybrid vehicles, limiting coverages for carbon emitting industries and increased parametric based underwriting for weather risk.
