National Insurance Awareness Day has evolved over the years to become an important annual event that highlights the crucial role of insurance in protecting individuals, families, and businesses. The goal of National Insurance Awareness Day is to help people understand the different types of insurance available, to empower people to make informed decisions about their insurance coverage and to recognize the value that insurance provides in safeguarding their financial well-being. By taking proactive steps to review and renew their insurance policies, individuals and businesses can have greater peace of mind and be better prepared to handle life’s unexpected challenges.
Despite significant progress in recent years, India still faces a substantial gap in insurance awareness and coverage. According to a report by the National Insurance Academy (NIA), over 40 crore individuals in India, constituting more than 31% of the population, lack health insurance. This health protection gap is attributed to lower penetration, coverage inadequacy, and rising healthcare costs.
The life insurance sector also exhibits a large protection gap, with an 87% gap across the country. The mortality protection gap is particularly high among younger age groups, exceeding 90% in the 26-35 age bracket.
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Some of the key gaps and challenges prevalent in insurance sector:
Low Insurance Penetration and Density: India’s insurance penetration (premiums as a percentage of GDP) was just 4.2%, well below the global average of 7.5%. Insurance density is also much lower than developed markets. This indicates a large protection gap, with a majority of the population lacking adequate insurance coverage.
Lack of Awareness and Trust: Many Indians, especially in rural and semi-urban areas, lack awareness about the benefits of insurance and how it works. There is also a general lack of trust in insurance companies due to past mis-selling and poor claim settlement experiences. Improving awareness through education campaigns and building trust through better customer service is crucial.
Affordability and Accessibility Challenges: Insurance products are often unaffordable for lower-income segments due to high premiums. Lack of access to insurance, especially in rural areas with limited distribution networks, is another key barrier. Innovative micro-insurance products and leveraging technology for last-mile distribution can help address these challenges.
Gaps in Product Offerings: While the range of insurance products has expanded in recent years, there are still gaps in terms of customized solutions for specific needs. For example, there is a lack of affordable health insurance plans for the informal sector and a need for more crop insurance options for farmers. Insurers need to innovate and design products that cater to the diverse needs of the Indian population. India is more focused towards health, life and motor insurance, while the need for insurance ranges to home insurance, travel insurance, shop insurance, SME insurance and so much more.
Inefficient Claims Management: Delays and disputes in claims settlement remain a major pain point for customers. Leveraging technology for faster claims processing, improving transparency, and enhancing customer service can go a long way in improving customer experience and trust in the industry. IRDAI too has recently announced for insurance companies to settle claims within three hours; it is a great move and will be transformational, solving a critical insurance aspect for the consumers.
Despite these challenges, India’s insurance sector offers immense growth potential given the large uninsured population, rising incomes, and increasing awareness. Insurers that can innovate, leverage technology, and provide affordable and accessible solutions tailored to customer needs will succeed in the coming times. Collaboration between insurers, distributors, and the government will be key to bridging the protection gap and ensuring insurance for all.
(By Chetan Vasudeva, Senior Vice President of Business Development at Elephant.in)
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