The penetration of insurance in India is 3.76 per cent of the country’s GDP. Isn’t it surprising to see that a financial tool which is capable of covering risks you or your assets face has such a dismal penetration? I firmly believe that insurance plays a crucial role in not only uplifting our economy, but also our society by enabling us to recover faster from losses due to various risks. May it be a pandemic, natural calamity or a minor road accident, it there to take care of you and helps you stay worry-free as you know that you have a back-up in case things go wrong. This brings us to the question –What can we do to reach the large sections of the hitherto uninsured Indian population? While awareness about insurance holds the key to bring in more people under the ambit of insurance, I feel enablement in the form distribution/availability at each and every touch point is equally important.
One of the most successful approaches to increase insurance penetration are the mass insurance schemes introduced by the Government. For instance, Pradhan Mantra Fasal Bima Yojana (PMFBY) helps insure close to 6 crore farmers year-on-year against crop loss; Pradhan Mantri Jan Arogya Yojana (PMJAY) provides health cover to around 50 crore people belonging to the poor strata of the society; Pradhan Mantri Suraksha Bima Yojana (PMSBY), which is a disability and accidental death policy covers over 20 crore people. These numbers clearly show us that Government insurance schemes have certainly been successful in insuring the masses, especially the ones the ones belonging to the lower strata of the society; providing them with a much them with a much needed support and enabling them to live a life of dignity if things go wrong. I firmly believe that there’s a need for more such Government schemes which can cover various important aspects of a person’s life. For instance, AB-PMJAY covers the poor strata of the society. I feel various States can start this scheme to cover all their citizens irrespective of their strata. Few regions like Jammu & Kashmir and Rajasthan have already started doing the same. However, I’d encourage more States to follow this model. Doing the same will provide quality medical treatment access to many and also uplift the medical infrastructure of our country.
Additionally, Government can introduce an affordable home insurance scheme in association with insurance companies to cover losses to property during Nat-Cat events. An index based scheme (Parametric Insurance) can be adopted which compensates for the damage caused due to a catastrophic event, as per the predefined triggers for such events. Premium for the same can be collected along with the property tax and once the claim is triggered, the amount can be transferred to the Jan Dhan bank account of the beneficiary. IRDAI has set up a working group to explore this approach and I’m sure that if implemented, it will go a long way in supporting our economy by bridging the gap between insured losses and economic losses due to natural calamities.
Another model is PoSP or Point of Sales Person. IRDAI has launched the PoSP model, which allows a person to sell pre-underwritten and approved insurance policies. This person can be working in your neighborhood grocery store or a cellphone repair shop, whoever has the necessary qualifications can be a PoSP. Thus, with the help of the local connect of the person would enable insurers to increase their reach and sell relevant insurance products at the point of sale. This model needs to be further encouraged to not only increase the penetration of insurance, but to also increase employment opportunities in our country.
Micro-insurance products offer cover to people belonging to lower income groups and are tailored for their needs. One of the successful models is the IT platform created by the Government called Common Service Centers (CSC), through which micro-insurance is sold along with other financial services and other public and private services. With the help of transparent digitized processes and easy accessibility of products to the people, insurers are able to cover the most vulnerable sections of the society.
Insurance is an indispensable financial tool, which plays a vital role in supporting our economy and people in times of dire need. Insurers along with various stakeholders, including the Government, and the insurance regulator have been working towards reaching the customers at the base of the economic pyramid. Products and processes have been simplified and customized as per the needs of customers. However, there’s a need to constantly upgrade our current approaches and introduce new distributional models by leveraging technology to ensure that we reach the last mile and are able to serve the unserved, thereby reducing the protection gap.
The article by Mr Tapan Singhel, Chairman, CII National Committee on Insurance & Pensions and Managing Director & CEO, Bajaj Allianz General Insurance, first appeared in the July 2021 issue of CII Economy Matters. Click here to read.