 "insurance")
Low insurance penetration in the country, a phenomenon being seen for the past several decades, can be reversed if measures on financial education of the public and building trust are taken. In fact, the insurance community believes these are among several measures crucial in achieving the Insurance Regulatory and Development Authority of India’s (Irdai’s) target of “Insurance for All by 2047”.
“To change this (the image of insurance being a push product) and boost the industry in India, several strategies need to be implemented like educating the public about the importance of life insurance with slogans like ‘Sabse Pehle Life Insurance’,” said Vibha Padalkar, managing director (MD) and chief executive officer (CEO), HDFC Life Insurance.
Irdai has committed itself to enabling “Insurance for All” by 2047, where every citizen has life, health, and property insurance cover and every enterprise is supported by insurance solutions and also making the Indian insurance sector globally attractive.
To attain this objective, efforts are being made to create a progressive, supportive, facilitative and a forward-looking regulatory architecture to foster a conducive and competitive environment leading to wider choice, accessibility, and affordability to policyholders. This reform agenda taken up by Irdai derives inspiration from the Government of India’s vision of financial inclusion and strong emphasis on accelerating reforms.
However, the sector continues to face many impediments to this — including lack of awareness, low literacy rates, lack of affordability, and accessibility.
“However, in spite of the uncertainties, awareness remains the key concern for the insurance industry in India. This is coupled with the low literacy rates across the vast geography and diverse demographics of the country. However, the regulator’s focus on boosting ‘Awareness, Accessibility & Affordability’ is designed to address these challenges,” said Ritesh Kumar, MD and CEO, HDFC ERGO General Insurance.
Voicing a similar opinion, Sunder Natarajan, chief risk officer, IndiaFirst Life Insurance, noted: “Limited infrastructure and access, low financial literacy and awareness, affordability and cost sensitivity, and the need for trust and relationship building, all of these affect the last mile in insurance distribution, particularly in rural and underserved areas.”
Speaking on limited infrastructure, Kamlesh Rao, MD and CEO, Aditya Birla Sun Life Insurance, said: “Despite substantial technological advancements aimed at streamlining processes and enhancing insurance accessibility, there is a stimulating road ahead in catalysing change and heightening insurance penetration in rural areas. Moreover, building awareness and trust among a diverse population necessitates extensive outreach programmes, which may strain existing infrastructures. The expansion of insurance services to remote regions may require additional investment in physical infrastructure. In summary, while significant strides have been made, continuous investment and innovation in infrastructure are vital for insurance companies to realise the ambitious goal set by the regulator.”
Padalkar of HDFC Life says the infrastructure is available, and the industry needs to take a few steps beyond selling insurance to increase penetration. “Insurers have the infrastructure in place to achieve the target of Insurance for All by 2047. We are expanding our geographies, actively tapping into the Tier-II and -III markets. To enable further expansion into the geographies beyond Tier-I cities, we are in talks with the regulator to allow agents to distribute other financial products as well, to provide stability and make selling insurance more sustainable for them.”
In order to counter these challenges, the regulator has taken several initiatives that will boost insurance penetration, which stands at 4 per cent in India as compared to 6.89 per cent globally.
Irdai has allocated targets to insurance companies to expand insurance coverage in each state and relaxed the solvency norms for certain product categories. The amendments to Expense of Management (EOM) & Commission have been made more flexible, which allows quality—or behaviour-based compensation among others.
Further, Irdai, with an aim to shift insurance from a rule-based regime to a principle-based one, has introduced regulations that will help in ease of doing business for insurers. It has also come up with amendments to the product side — from “File and Use” to “Use and File”. Further, the sandbox mechanism is also an example of this, of providing a conducive environment for insurtech and fintech companies to carry innovation in the sector.
Another key change in the insurance industry was the adoption of IFRS 17 — the new accounting standard for insurance contracts, which would help global investors better gauge the risk exposure of domestic insurers.
Apart from these, the regulator has cleared the intent to move towards 100 per cent cashless for health claims, capturing the Ayushman Bharat Health Account (ABHA) ID (Universal Identifier) of proposers to facilitate transparent and speedy claims processing National Health Claims Exchange (NHCX) platform to promote interoperability.
A flagship initiative introduced by the regulator is the Bima Trinity — Bima Vahak, Bima Vistaar, and Bima Sugam.
“The ‘BIMA Sugam’ is a one-stop shop for all insurance where intermediaries will be allowed to participate. Hence customers may prefer to buy products from this platform. The platform will also ensure that the products are offered to the clients in accordance with their current and future needs. The upcoming platform will be a landmark moment for the insurance industry and will definitely help in solving the low penetration problem of India,” said Shashi Kant Dahuja, chief underwriting officer, Shriram General Insurance.
“Bima Vahak will be a women-oriented distribution channel that will promote trust and insurance awareness in rural areas and promote insurance products. Bima Vistaar, on the other hand, will be a bundled product that will provide life, health, casualty, and property cover in a single-insurance policy at an affordable cost,” Dahuja added.
An equally important proposal by Irdai was to set up a body similar to the State Level Bankers Committee (SLBC), which will include officials from state governments, insurers, and representatives from Irdai to monitor the implementation of state insurance plans.
“The plan is to create an insurance awareness and financial literacy programme with emphasis on skill development for employment generation. It also strengthens the grievance redress mechanism and faster settlement of claims. The SLBC also has to define short-term, mid-term and long-term targets for the insurers, develop and strengthen insurance distribution channels, and promote government schemes (Pradhan Mantri Jeevan Jyoti Bima Yojana, etc), increase insurance coverage for industries in micro, small, and medium enterprises and technological interventions for promoting insurance penetration,” Padhalkar added.
Speaking on the proposal, Rao said: “We see this as an opportunity to collaborate with the proposed state insurance plans and contribute to the nation’s goal of enhancing insurance penetration. We recognise the importance of coordinating efforts with the government and other stakeholders to address the protection gap and develop tailored insurance solutions that cater to the unique needs of different regions and demographics.” Irdai has also taken initiatives encouraging technological advancements including monthly “Open House” conducted for fintech and insurtech players.
“With a clear focus on leveraging cutting-edge technologies, Irdai is at the forefront of enhancing customer experience. Initiatives like dematerialisation of insurance policies are poised to revolutionise the sector. By minimising paperwork and maximising convenience, these technological advancements position insurance as a pivotal player in India’s evolving financial landscape,” Natarajan said. According to Rao, insurance companies can be used for managing policies online along with the use of data analytics and artificial intelligence, allowing in more accurate assessments of risk, leading to personalised and competitively priced insurance products. Further, mobile technology can also be used in the outreach and communication, helping the insurers to connect with the wider audience. Use of technology is integral in creating a more inclusive, efficient, and customer-centric insurance industry which will cater to the needs of the population. Despite the best of efforts, insurance is still broadly considered to be a “push” product and insurers believe steps need to be taken to correct the misunderstanding. Companies should take a more customer-centric approach which will lead to comprehensive awareness on insurance along with attractive pricing strategies from companies.
“A comprehensive insurance awareness campaign, like the way the mutual fund industry did with ‘Mutual Fund Sahi Hai’, is needed to create a positive impact in the minds of customers. Moreover, by implementing strategies like launching flexible products for customers, embracing technological advancements for creating seamless and user-friendly experience at the time of both underwriting and claims settling, and by building trust by providing them transparency in policy terms and pricing, insurers can shift from being perceived as those pushing products to making them more needed ones,” Dahuja said.
Lack of trust is a factor in the slow growth of insurance, which can be taken care of by building trust.
“Building trust is one of the key essentials in the insurance sector. Here factors like credibility and the claims settlement ratio play a larger role. A healthy claims settlement ratio establishes the goodwill of the insurer, thereby resulting in enhanced trust from the customers,” said Kumar.
“Apart from this, ensuring transparency in product offers, claims processes, and overall customer interactions is crucial. Once trust is established and customers become aware of the importance of adequate insurance, insurance will gradually move from the optional bucket to the compulsory bucket list of the customers.”
If all or most of these measures are effectively implemented, it will be much easier for the industry to help the customer understand “Insurance Zaruri Hai” and thereby boost insurance penetration in the country as well as the growth rate for companies.
