Insurance is often thought to be something only the rich can afford. This has possibly led to the current insurance penetration rate in India being extremely low as compared to the rest of the world. It is only 3.42% in India, while the global average is 6.2%.
According to Mr. H Ansari, a former member of the Insurance Regulatory and Development Authority of India (IRDAI), and insurance expert Mr. Arun Agarwal, the existing regulatory framework for insurance is the main culprit. They say that it is insufficient to promote insurance penetration and density in the country.
In a report they co-authored, titled ‘Transformative Agenda for the Indian Insurance Industry and its Policy Framework’, they state that, “A 1% rise in insurance penetration translates into 13% reduction in uninsured losses-an increased investment equivalent of 2% of national GDP and a 22% reduction in taxpayers contribution.”
The report talks mostly about the areas that need to be addressed, from a policy, regulatory and market development perspective and says that to achieve the government’s objective to have a country with full insurance and pension penetration, the regulatory framework would need to be transformed. The report was sent to the finance ministry and insurance regulators.
India has nearly 17% of the world’s population but accounts for less than 1.5% of the world’s total insurance premium. A growth of 32% of the gross direct premium of general insurance has been observed in India, with general insurance companies seeing a gross premium of ₹1.27 lakh crore, in financial year 2016-17. Life insurance companies meanwhile, saw a growth of 26.13%, with the premium rates increasing from ₹1,38,760.47 crore in March 2016 to ₹1,75,021.89 crore in March 2017.
In spite of all the growth, however, India is still both under-penetrated and inadequately penetrated by the insurance market. A transformation is needed and the regulators need to be the ones to begin the change.
Source: Financial Express
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