Over 40 crore in India don't have health insurance: Report

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Despite increased awareness about insurance, India is still grappling with a health protection gap of 73 per cent, leaving over 40 crore individuals without health insurance, found a report. This constitutes over 31 per cent of the country's population. The National Insurance Academy (NIA), an institution dedicated to research, and development in insurance, pension, and allied fields, released a report exploring the Indian insurance landscape on Thursday. 

The report found that the lack of health insurance was due to lower penetration, coverage inadequacy, and rising healthcare costs. Factors also include a low perceived need for insurance, lack of product understanding, unavailability of customised products, high rates, and limited accessibility to customers, said the report.  

The report also found an 87 per cent life insurance protection gap across the country. It further noted that the mortality protection gap (MPG) in the 26-35 age group exhibits a protection gap exceeding 90 per cent.

“Through our comprehensive research findings on the protection gap in India, we have tried our best to highlight the way forward, revealing not only the challenges but also the opportunities to safeguard the aspirations of millions,” said Dr Tarun Agarwal, Director of NIA, speaking at the seminar. 

Life Insurance gaps present a $106.8 billion business opportunity

According to the report, a significant opportunity for life insurers in India emerges with an 87 per cent protection gap in life insurance, potentially leading to a premium volume of $106.8 billion by 2030. 

“To capitalise on this opportunity, insurers must dissect the protection gap across age groups, income levels, and occupations. Our report suggests targeting high-potential demographic segments with tailored marketing strategies,” said the report. 

To bridge the 90 per cent life insurance protection gap in the 26-35 age group, as per the report, insurers can offer bundled savings and risk protection.

The report further revealed that the 36-45 Age Group,  also exhibit a 90 per cent protection gap. It recommended targeting them with comprehensive risk protection and riders for critical illness and enhanced coverage.

Upper Middle-Aged customers (45+), exhibited a higher awareness levels; poised for insurance products with added benefits, as per the report.  

Middle-income households (Rs 5-10 lakh) constituting 70-80 per cent of the population display a 90 per cent protection gap. The report suggested savings, investment products, and term insurance for the group. On the other hand, it suggested that insurance companies should offer high-value term insurance bundled with annuity and wellness insurance plans for higher-income groups (Rs 11-20 lakh), which has a better awareness.  

Customised health insurance cover 

To tackle the 73 per cent health insurance gap, the report recommended customised products tailored to the unique risks prevalent in different age groups, genders, and occupations. 

Implementing innovative solutions, such as savings-linked long-term health insurance, can be essential in enhancing penetration, particularly among the younger and middle-aged demographics, said the report.  

Waiving GST on premiums for low-income and unorganised sector workers, as per the report, could encourage their health insurance coverage, coupled with discounts for the elderly. It also advocated for preventive health practices, including offerings such as outpatient department (OPD) covers and fitness-related services. 

Long-term critical illness cover, with extended premium payment options, becomes imperative as the elderly demographic is anticipated to grow, it noted.  

Here are some other key findings of the report:

Challenges for pension and annuity cover:

• Pension coverage lags, with just 24 per cent enrolled in employee retirement schemes. Notably, low-income individuals and lower-middle-income segments exhibit a meagre 14 per cent and 25 per cent penetration, respectively.
• The annuity and pension protection gap currently stands at 93 per cent, with a marginal difference between urban (91 per cent) and rural areas (96 per cent).
• PFRDA statistics indicate that approximately 14 per cent of the unorganised sector workforce is covered under NPS Lite and Atal Pension Yojana. 
• The majority (73 per cent) of insured individuals are part of formal employee retirement schemes in organized sectors. Of these, 32 per cent are covered under central and state government schemes, 48 per cent by Employee Provident Funds, 15 per cent by NPS, and 5 per cent through life insurance company annuities.

Recommendations to improve coverage: 

• For greater penetration of annuity and pension protection, the report suggests, developing long-term care insurance with critical care and disability benefits is essential alongside pension cover to address old-age morbidity risks. 
• It recommends life insurance companies should establish an exclusive vertical dedicated to pension and annuity products. The Pension Fund Regulatory and Development Authority (PFRDA) should encourage standalone pension and annuity companies to enter the pension business. 
• Integrating pension and annuity products into the proposed Bima Vahak woman-centric distribution channel could boost coverage, bundled with Bima Vistaar for comprehensive life, health, and property insurance. 
• Offering suitable tax benefits to attract young customers to invest in these products is also recommended. 
• Strengthening efforts to enhance social security schemes like PM Shram Yogi Maan Dhan and Atal Pension Yojana, utilising banks and financial institutions through the Jan Dhan platform, is crucial. 
• The government can further enhance retirement benefits by increasing employers' contributions and providing tax incentives to improve pension and protection coverage.

Property cover in disaster-prone areas 

1. The Swiss Re report (2022) highlights India's current 95 per cent natural catastrophe (Nat CAT) protection gap, which is expected to increase due to rising climate risk exposures, infrastructure developments, and rural-to-urban migration. 
2. Munich Re's report (2021) shows nearly 91 per cent of natural catastrophe losses are triggered by weather-related perils, increasing volatility and reinsurance complexities.
3. Over 80 per cent of upper-middle and high-income customers lack a perceived need for property insurance.
4. More than 60 per cent of corporate customers demand Climate Risk Insurance.

Key recommendations: 

1. For the property insurance gap, the recommendations focus on simplifying insurance products with lower premiums to attract a broader customer base, suggesting collaboration with the government for premium subsidies to low and middle-income customers. 
2. Implementing mandatory natural catastrophe (Nat CAT) protection covers is proposed to enhance coverage in disaster-prone regions. 
3. Key areas for targeted awareness efforts include addressing the lack of property insurance among low- and middle-income individuals (84 per cent) and customers in coastal regions, tier-2, and tier-3 cities (77 per cent). 

Crop insurance challenges

1. The insured area and sum insured for crop insurance in India have decreased, accompanied by a decline in the number of insured farmers from 6.1 crore to 5.2 crore in 2023, according to the report.  
2. The primary reason for low penetration is the government making crop insurance optional for loanee farmers, leading to non-renewals. 
3. Some state governments have opted out of the PMFBY scheme, affecting coverage.
4. Lower enrollment is also due to the removal of the mandatory requirement for loanee farmers. 
5. Young farmers (18 to 25 years) and low-income individuals face higher protection gaps.

Key recommendations

1. For crop insurance, the recommendations include mandatory education for insurers and intermediaries to inform low-income farmers, utilising technology, social media, and mobile applications for awareness campaigns. 
2. Suggested measures also involve compulsory crop insurance for loanee farmers, supported by premium financing from microfinance institutions, and implementing group insurance schemes at the community level to reduce moral hazard and adverse selection. 
3. Additionally, strengthening weather data with satellite images, remote sensing, and ground sensors is recommended. 
4. Smartphone applications with video/picture-based assessment, AI, ML algorithms, and blockchain for automated loss assessment are proposed for efficient claims settlement. 

Cyber protection cover

According to the report, the cyber protection front gap is rapidly expanding across sectors due to increased exposure, higher digital usage, and growing connectivity. 62 per cent of customers want to protect their cyber risk through cyber insurance.

The report emphasised the need for explicit coverage specifications, with key professionals, including CFOs, CIOs, and CISOs, understanding their cyber risk exposure.

“Our findings highlight the nuanced dynamics of risk and resilience, providing a direction for policymakers, insurers, and the public alike. We are looking forward to taking the responsibility to turn insights into action, closing the protection gap and ensuring that every individual in India has the opportunity to build a secure and resilient future,” said Dr S Doss, Professor, NIA.