Insurance penetration ratio has a long way to go, says WWB's Kalpana Ajayan

Initiatives like Jan Dhan Yojana and Jan Suraksha have significantly boosted women's participation in financial services

This report has been updated  Government programmes like Jan Dhan Yojana and Jan Suraksha have bolstered women’s participation in financial services. But the benefits of government schemes are yet to reach a large section of the women population. A recent report by Women’s World Banking (WWB)-- a global organisation dedicated to women’s economic empowerment -- was a mixed bag on this. Kalpana Ajayan, Regional Head, South Asia of WWB discusses the role of savings accounts as an entry point for inclusion, the importance of women agents, and the challenges of persistence and claims processes in insurance adoption in an interview with Shikha Chaturvedi. Edited excerpts:

 

WWB’s study ‘Vulnerability to Resilience’ found that Jan Suraksha micro-insurance products saw success among rural segments, particularly women (8/10 had at least one). What are some reasons for this?

 

The first entry point towards financial inclusion is invariably a savings bank account. This step creates a digital financial footprint, enabling eligibility for essential products such as credit and insurance, which are crucial for the resilience of rural women. Contrary to the common belief that women are risk-averse, we have found them to be quite risk-aware. As primary providers and caretakers, they are keen on products that protect them and their livelihoods, a need accentuated by the COVID-19 pandemic. 

 

At Women’s World Banking, we saw a quick uptake among women for such resilience products, especially because they were being reached through women agents whom they could trust, making it an easy process to enrol. Equally importantly, Jan Suraksha products are simple to understand. When we began implementing these interventions with various banks, we observed adoption rates increase by three to five times. For adoption to happen at scale, the product has to be appropriate, affordable, and simple to understand because insurance is notoriously complex. Having been in the insurance business for nearly 15 years, I can say it’s one of the toughest. Jan Suraksha products meet all these crucial requirements which drove its adoption among rural, low-income women. 

 

As mentioned in the WWB report, despite a relatively higher adoption rate, only 2 per cent of women have actually claimed the benefits. What could be the key reasons behind this low utilisation rate?

 

The low claims ratio we observe indicates a broader trend within the insurance industry, rather than being unique to this segment. Several reasons contribute to this. 

First, the claims process itself is often complex, which can deter individuals from pursuing their claims further. Second, there is a significant lack of awareness regarding what customers can and cannot claim. This challenge is not limited to rural women in lower middle-income segments; even some financially literate individuals face difficulties in understanding claim eligibility. 

Finally, the actual settlement process can present multiple hurdles like the extensive documentation required from a customer to make a successful claim. Together, these factors—complexity, lack of awareness, and rigorous documentation—contribute to the low utilization of benefits among women who have opted for these insurance products.

 

What will boost insurance penetration among the bottom-of-the-pyramid population groups and women?

 

Often, when we discuss insurance penetration ratios in India, we fail to consider the impact of large-scale government social security schemes. While India still has a long way to go, social security schemes have contributed to relatively decent insurance adoption rates at the very bottom of the population pyramid. A more accurate assessment of insurance uptake can be achieved by examining specific segments rather than viewing the statistics as a whole. 

The real challenge lies within the "missing middle," which is estimated to encompass around 500 million people lacking adequate coverage.  

One significant reason for this gap is the absence of insurance products that are appropriate for this segment’s needs. 

Also, effective distribution channels have been lacking, which is where the "Insurance For All" initiative becomes particularly interesting. This initiative encourages the regulatory body to challenge the industry to develop innovative products, distribution channels, and platforms tailored to these underserved populations. I believe India is going to see a substantial change in the insurance landscape over the next ten years.

 

Insurance can be a complex product, especially for customers with low financial literacy. Given this, how are women adopting insurance, particularly Jan Suraksha? Are they willing to pay premiums consistently over time?

 

While enrollment is important, persistence is even more critical to this endeavour. Ensuring that customers renew their insurance coverage over time is essential for the success of both the product and the policy. The government has introduced a clever solution in this regard: automatic renewal.  

If there are sufficient funds in the bank account, premiums are automatically debited, which simplifies the process significantly. Unlike many private sector offerings, there is no need for customers to actively remember to renew their policies, as the annual premium is deducted as long as there are funds available.  

Despite the need to help customers understand the importance of timely renewals through awareness, it is important to recognize how effectively Jan Suraksha products have been designed for scalability and ease of implementation. 

Further, Jan Suraksha serves as a solid foundation for insurance coverage; it is the first level of protection, allowing for the development of additional relevant products that can be built on top of it for this segment.

 

Digital financial inclusion has been a major focus of the government, yet significant challenges remain, particularly due to India’s cash-dominated economy. With 81% of the employed population working in the informal sector (as per ILO data), maintaining a stable bank balance for insurance payments can be challenging for individuals from the unorganised sector and gig economy. How can these groups, especially women from these groups be better integrated into the formal financial and insurance ecosystem?

 

At Women’s World Banking, we advocate for more than just financial literacy; we emphasize the importance of Digital Financial Capability for women. This concept encompasses skills and knowledge, but it also includes building trust and a positive attitude toward digital finance. 

Digital solutions are essential for scaling these efforts. Therefore, it is crucial to encourage women's participation in the digital financial space. In a recent study conducted with NPCI on digital payments adoption among women, titled "UPI For Her," we analyzed various profiles to understand their engagement with digital finance. Two noteworthy segments we identified are the "Fierce Conservatives" and the "Cautious Balancers." 

Fierce Conservatives are reluctant to transition to digital platforms due to fear and mistrust. In contrast, Cautious Balancers may use a smartphone but are apprehensive about fully exposing their bank balance to digital payments. For the latter group, an effective solution could be an online wallet that is decoupled from their bank account, allowing them to engage with digital finance while maintaining a level of security. 

It’s important to recognize that women are not a homogeneous group; they have diverse needs and concerns. Tailored approaches and solutions for different segments of women are essential. The best way forward is to pilot solutions in collaboration with banks, fintech companies, and local organizations. These successful initiatives can then be replicated across various markets and scaled up effectively.

 

Given the current challenges in financial inclusion, digital adoption, and the dominance of the informal sector, do you think the goal of achieving ‘Insurance for All by 2047’ is realistically achievable?

 

I believe that this is not an impossible task. We didn’t think 55 crore Jan Dhan accounts could be opened in seven years either, but we did it. It starts with a vision. Second is the ability to execute– this is where India’s robust Digital Public Infrastructure will shine. And finally, the most important is the will, which is active participation from both the public and private sectors.