Insurance inclusion on a fast-track


In the recent summit, many financial sector leaders converged to exchange the future shape of the BFSI sector. Banks having achieved a formidable inclusion in India, the insurance sector is now gearing up for outreach. Amid the ongoing journey of insurance reforms, the experience of the pandemic brought about a new wave of sensitization towards the need for insurance to meet unforeseen contingencies. The data sources indicated that insurance penetration is close to 4.2 percent when measured in terms of premium to GDP ratio. The life insurance penetration is 3.2 percent and 1.0 percent for non-life insurance. The general insurance industry plans to increase its penetration to 1.5 percent of GDP by 2030, up from the current 1 percent. The general insurance industry is expected to grow at a compound rate of 20–25 percent for the next 10-15 years due to the reforms and progress witnessed in the industry. Similarly, life insurance continues to remain as a sunrise sector characterized by low penetration and a large protection gap opening up massive growth opportunities in the coming decade.

  • Insurance sector during Amrit Kaal:

IRDAI is augmenting all resources towards achieving the goal of ‘Insurance for All’ by 2047. It is based on the foundation of creating ‘ease of doing business’ mainstreaming technology, creating lucrative opportunities, and revamping the ecosystem. As the Digital Public Infrastructure (DPI) is getting strengthened, insuretech and other digital insurance intermediaries are mapping the business landscape from street to sky to explore further penetration in the hinterland. With digitally driven insurance outlets increasing along with diverse products, and increased awareness to seek protection from various types of business and other risks, the sector will have ample opportunities to grow.

The reform agenda is well crafted to ensure that the insurance ecosystem is developed to facilitate the entry of more players, more expertise, more technology, and more capital in the sector and thus ultimately geared towards realizing the vision of ‘Bimakrit Bharat’ where every citizen, family, business will be adequately protected and insured.

  • Growth of the Insurance sector in India:

Beginning with the recommendations of Malhotra committee (1993-94) when IRDAI Act 1999 was enacted leading to the formation of IRDAI in the year 2000 opening up the sector for global competition. Since then, the growth of the insurance sector picked up pace, and inflows of foreign investments increased providing capital support to the insurance companies. The sector has been liberalized with the entry of new entities. The Government of India has also further opened up FDI (foreign direct investment) in the insurance sector up to 74 percent (from 49 percent). FDI in intermediaries – insurance and reinsurance brokers, insurance consultants, etc. have been permitted up to 100 percent.

As a result, the insurance industry of India has now 57 insurance companies – 24 are in the life insurance business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. There are six public sector insurers in the non-life insurance segment. The sole national re-insurer, namely General Insurance Corporation of India (GIC Re) provides services to primary insurance entities. There are 10 other foreign reinsurance branches in India to support the sector. Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors, and third-party administrators servicing health insurance claims. The insurance market is expected to reach US$ 200 billion by 2027 and the country is well poised to be the sixth largest in the world in the insurance business.

Outlining the need for the protection of policyholders, IRDAI launched ‘Bima Bharosa” a digitally driven customer grievances redressal system with built-in time lines and auto driven escalation mechanism. Keeping supply side needs, an online ‘Bima Sugam’ platform has been created where insurance entities can participate and deliver products and services. In addition, ‘Bima Vistaar’, a first-of-its-kind all-in-one affordable insurance product offering – life, health, and property cover is likely to be on offer soon. Like business correspondents used by the banks for financial inclusion, a scheme called ‘Bima Vahak’ is being launched to establish a women-centric dedicated distribution channel that is focused on enhancing insurance inclusion and creating awareness in every village/gram panchayat, thus, improving accessibility and availability of insurance in every nook and corner of the country.

In addition, IRDAI is considering institutionalizing a state-level body akin to the state-level banker’s committee (SLBC) working now for banks. Even some districts are coming up to form a coordination body to work for greater penetration of insurance at the micro level. New insurance products will soon be in markets to provide insurance coverage against cyber threats and climate change-related risks. Insurance policies aimed at promoting sustainability and resilience, while factoring in climate-related concerns will also be innovated.

The market players will eventually move towards augmenting risk-based capital to align with their risk appetite. Simplifying the language of insurance product pamphlets, insurance contracts, better disclosures, and building up the trust of policyholders will be the future competitive leverage.

The sector is thus gearing up as ‘future-ready’ by achieving the three pillars, which it aims to do by around 2025. The pillars – (i) adopting a risk-based capital approach, (ii) convergence with International Financial Reporting Standards (IFRS), and (iii) transitioning from a rule-based approach to a principle-based one.

IRDAI has been reiterating that it is on a mission to revamp and reform the insurance sector in the country with increased penetration. With the insurance intermediaries actively associating and insurance literacy on the rise, the sector is well poised to reach every Indian in years to come. The synergy of ongoing regulatory reforms is targeted to address three key issues: availability, affordability, awareness, and accessibility with a focus on pursuing the goal of insurance inclusion.




Views expressed above are the author’s own.


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