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Insurance Article

Uninsured and Underinsured: An Issue That Needs Addressing

February 02 2018
Uninsured and Underinsured

Insurance penetration is not only low in India, but underinsurance is also proving to be a big concern.

In 2016, only about 24% of the population had some form of medical insurance. The Insurance Regulatory and Development Authority of India (IRDAI) estimated that 28.8 crore individuals were insured in 2014-15. How many of them were underinsured was not reported. However, as the claims started pouring in, insurance companies found out that large number of its customers were underinsured.

The issue of being uninsured and underinsured stems from the ignorance or the mindsets of the people in general. Most of the time, uninsured people choose to remain uninsured because of the lack of the knowledge or simply being ignorant towards future risks.

What is Underinsurance?

The maximum liability to be incurred by the insurance company in the event of a total loss is based on the sum insured declared at the time of policy issuance, by the person insured. The customers are expected to pay premiums to ensure their assets remain protected from losses.

But, at the time of claim, it is found that the asset has not been insured for the full value. This results in the insurance pay-out being less than the actual value. This condition is called underinsurance or Condition of Average.

The Premium Factor

The underinsured person, who is convinced of protection in the event of a loss, may find out that he is not adequately covered at the time of claim filing. This may happen because of the lack of knowledge about the actual insurance coverage required for the full value of his assets. The insured is expected to cover his assets for their full value and pay the premiums accordingly to avoid paying out of his pocket at the time of filing the claim. Some people may deliberately quote lower value of their belongings in order to pay lower premiums.

Addressing the Issue

The people from lower income groups are unaware of this financial protection instrument and the benefits it offers. These are the uninsured, and they are the ones suffering the most during adversity. Private corporations along with government agencies need to educate people about choosing the right kind of insurance.

Government agencies could make health insurance mandatory for employers, both in the organised and unorganised sectors. A national health insurance scheme by the government in line with the Pradhan Mantri Suraksha Bima Yojana could be one such effort. The customers on the other hand have to ensure the adequacy of the sum insured.

The key to leading a life that is secured from losses is using the financial protection instruments such as insurance to its maximum potential. With a little help from the authorities, this protection can also be given to those who need it the most.

*Source: The Hindu

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