India’s insurance sector has been steadily expanding in the past decade. However, the growth hasn’t been satisfactory enough, and the country’s share in the global insurance market still remains extremely low. As per the Economic Survey of 2020-21, insurance penetration in India only marginally improved from 2.71 per cent in 2001 to 3.76 per cent in 2019. India, thus, remains far behind its regional counterparts, such as Malaysia and Thailand, when it comes to the widespread expansion of insurance.
One of the main reasons why the insurance sector isn’t expanding fast enough in India is because of the high premium costs. High premium costs have been a traditional deterrent for people trying to avail themselves of insurance schemes, and it eventually leads to a vast majority of the population to be under-insured or uninsured.
In addition to this being an industry-specific issue, the lack of insurance cover is also a problem for ordinary working-class families at large. This is because insurance plans are extremely useful and beneficial to anyone looking to protect their family, assets/property, and themselves from financial risks and losses. Having insurance plans can help immensely when it comes to paying for medical emergencies, hospitalisation, treatment of serious illnesses, and so on.
In India, out-of-pocket expenditure during medical and other unexpected emergencies is high, and insurance could help cover these heavy expenses and ensure that families don’t have to break into their life savings just to pay medical bills or repair the damage to their home from a fire. Insurance could, thus, mean the difference between financial security and debt, and therefore, must be considered as an essential, as opposed to being optional.
The question that remains is what can be done to increase the penetration of insurance in India and ensure that more people are aware of its benefits.
Explore untapped markets within the country: India’s rural population stands at around 450 million, yet, insurance coverage in these vast pockets of population remains abysmally low. For example, life insurance coverage in rural India is pegged at a mere 8-10 per cent. If the insurance market is to expand its footprint in India, it has to explore the vast rural market of the country. This can be done by leveraging technology and creating more accessible models of insurance for rural populations. For example, digital banks that are built on Aadhaar architecture and use AePs for transaction purposes to make digital financial services more accessible to rural populations, can be used by insurance companies. Insurers can bundle livestock, crop, and health insurance policies, and make them available through these very same digital channels.
Small-ticket insurance covers: Small-ticket or bite-sized insurance products ensure that affordable policies are available to a wider audience. Good examples of such products would be dengue insurance, backpack insurance, and mobile screen insurance, among others. Such products are tailor-made for low-income groups as per their needs, and ensure that they are gradually introduced to the idea of insurance and see its benefits.
Affordability: India is a price-conscious market. Hence, affordability remains a top priority for most people when buying insurance products. Currently, insurance premiums are taxed at 18 per cent, and this is extremely unfeasible, considering the insurance market penetration is in single digits. In order to make sure that the maximum number of people avail themselves of insurance policies, the GST rate should be slashed to 5 per cent or be brought down to nil.
Making it more accessible through collaboration: For businesses looking to offer insurance to their customers along with their products, there are scores of collaborative opportunities in the form of insurtech companies. These companies provide easy to use plug-and-play solutions that make it quick and easy for any business to provide insurance policies along with their primary offerings.
Constantly developing and delivering to the changing demands: Like most other industries, the insurance industry is also in the business of change. Hence, gone are the days when the one-size-fits-all approach could work. Today, with India’s vast and diverse population that is increasingly armed with mobile phones and Internet connectivity, being digitally versatile is crucial for insurance companies looking to expand their footprint in the Indian market. Insurance providers today need to make the best possible use of social media and digital tools that allow for speeding up of processes, such as KYC verification, customer on boarding, virtual claims adjusting, automated underwriting, and so on.
Consumer Awareness: Last, but not the least, aggressively promoting consumer education about insurance products is an undervalued, yet important strategy. Currently, India remains one of the most under-insured countries in the world because a vast majority of the populace is not aware of the various risks associated with their life, health, business, car, home, etc. Hence, insurance companies need to take it upon themselves to change this and drive the narrative in their favour through initiatives, such as marketing campaigns, customer awareness seminars, press releases, write-ups, direct mailing, and much more.
Despite all the chaos and devastation brought about by the pandemic, the silver lining for the insurance industry is that people are now more open to the idea of insurance. This has transpired because people witnessed first-hand the indispensability of health insurance during a global health crisis. Hence, insurance companies must leverage this golden opportunity to make deeper inroads into the Indian market.
The author is founder and CEO, 1Silverbullet
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)