A top panel, constituated by the government in 2019 under the chairmanship of Subhash Chandra Khuntia, chairman, Insurance Regulatory Development of India, has recently submitted its report on the ways to increase insurance penetration in the country.
“Yes, we have submitted the report of a high level committee to the government outlining concrete short-term, medium-term and long-term measures for increasing insurance penetration,’’ confirmed Khuntia, who will be completing his three year term at the IRDAI tomorrow. to Asia Insurance Post.
The report has also taken up several other themes like protection from natural catastrophes, building up of actuarial profession, insurance for farmers and rural areas etc, he said.
The insurance penetration has increased in the country , but the increase is still quite insufficient.The liberalization of the Indian insurance sector has been beneficial in several ways.The insurance penetration has increased from 1.93% of GDP in 1999-2000 to 3.76% in 2019-20, he said..
However, as against global average of 7.23%, Indian penetration is low at 3.76%. Particularly, the penetration in non-life at 0.94% is almost one-fourth of the global average. There is tremendous scope for increasing this penetration, added Khuntia..
“Due to competition, the efficiency and reach have increased and premium rates are among the lowest globally. In future, further enablement is needed for the insurers to be innovative and to use the latest technology and IT so as to continuously address the emerging customers’ needs,'' he suggested.
He also revealed that a proposal to initiate pilot projects covering some states or districts prone to natural disasters like cyclone and flooding has been sent to the government and the National Disaster Management Authority(NDMA).
“The idea is to cover all dwelling units in a vulnerable geographical area against natural catastrophes. The cost of coverage upto a limit can be funded by the Government and the owners can pay additional premium for higher coverage. Since dwelling unit insurance is very cheap, this is quite affordable and feasible and will save Government expenditure in terms of compensation to the affected after the incident,'' he explained..
According to him looking at the size of India in terms of population, geographical spread, diversity and low insurance penetration, there is tremendous scope to have more insurance companies. The market is far below the saturation point.
“At the same time, as a regulator, we need to allow only credible companies that satisfy minimum eligibility conditions. We do not have any target for acceptance or rejection of applications, but each application is evaluated strictly on merit,''he clarified.
On lack of profitability in the Indian insurance market, he observed that normally, it is expected that general insurance companies should break even in five years and life insurance companies in seven years.
“Unfortunately, several companies have taken longer for various reasons, though a few have been able to achieve that.The managements of the companies need to devote more expertise and energy in that direction and must reach out to unexplored areas and target groups rather than competing for the same small set of customers based in metro cities. The IRDAI is constantly working with the insurers to provide supportive regulatory framework,'' he said.