A lot of misconceptions about insurance products still prevail
The growth rate of the insurance industry in India has consistently surpassed the growth rate of the country’s GDP. The Gross Direct Premium (GDP) of non-life insurance business reached ₹1,51,000 crore for FY2017-18, and for the past six years has been growing at a CAGR of 16.65%, riding on the back of health insurance. But, the actual extent up to which this growth is reflective of people adopting insurance in their lifestyle remains questionable, to say the least.
Penetration is the ratio of total premium collected by all the insurers in a financial year to the GDP of the country. In India’s case, it was 3.49% as compared to 6.3% global insurance penetration. Another parameter to gauge growth is the per capita insurance premium or insurance density. In India, it was $59.7 for the year 2016-17 while it reached $638 globally in 2016.
The slow growth can be seen as a result of people’s reluctance to get insurance, and several factors contribute to generating reluctance.
Inadequate Pay
A lot of the times people do not put aside money for insurance because they feel they are already living in hand-to-mouth situations. While the scarcity of money is a major deterring factor when opting for insurance, the need for insurance in low-income households becomes all the more pressing.
Taking small amounts of money out can eliminate the stress of having to go all out or being utterly helpless at the time of emergencies.
Healthy People Don’t Need Insurance
The freedom to be able to live in the moment comes when you have a solid backup plan. Leading a healthy lifestyle without the reassurance of a general insurance policy goes only so far. The probability of accidents and diseases cannot be eliminated even if you follow all the rules of healthy living. Health insurance only ensures your peace of mind, thus augmenting your lifestyle choices.
Do Not Have Dependants
Young people usually do not have any dependants. Their parents have their finances sorted, and they do not have families of their own to take care of. In these cases, many a time the need of getting an insurance policy, especially health insurance, is questioned.
This attitude towards insurance can cost in the long term because getting insurance done when you are young is much cheaper than when you get insurance after starting a family and having children of your own.
Incomplete Financial Information
Most of us take our parents as an example when making lifestyle choices. The current working generation lives in entirely different circumstances than what their parents did. For the families that have fared well without having to take insurance, they inculcate the same mind-set of living in denial or that very Indian mentality of make-do in their children.
Incomplete knowledge of the financial risk they are putting themselves under by opting not to take a general insurance policy can prove to be detrimental in the long run.
Government Relief Schemes
Central and state governments usually undertake natural disaster and significant accident relief by announcing ex-gratia relief to people directly or indirectly affected by the disaster. Where on the one hand, it provides financial aid to some extent to the families of the deceased or injured, it negatively affects the insurance industry.
The urgency with which people should approach getting insured is blunted, and the dull approach towards getting an insurance policy remains unchanged.
Complicated Process
Many people stay away from general insurance policies because they feel that it is a complicated process that requires a lot of time and energy to be managed effectively. Where on the one hand, it can be a daunting process when you are looking at it without understanding the basics, it consistently becomes more comfortable to handle once you have started the process.
Many insurance companies in India provide services and experienced guidance to their customers to ensure that they get tailored services. All you need to do is find an insurance company with a good reputation which you can trust, and they will take it from there. The advent of online policies have made insurance products reachable within the touch of a button.
No Trust
Insurance companies and firms also lack in generating trust in the minds of people. This becomes a significant factor in why people, especially in Asian countries, shy away from getting insured. This is also why a few notable players in the insurance market dominate while others fail to create a substantial impact. Reputation must be built over time in order to gain people’s trust.
Related Article:
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Uninsured and Underinsured: An Issue That Needs Addressing