🇮🇳 IRDAI’s Plans to Insure Every Indian

India's insurance penetration is much lower than most countries in the world. But our insurance regulator is trying to change this. Here's how.

If you’ve ever wanted to feel special and get that “lakhon me ek” (one in a million) feeling, India is the right place for you.

All you have to do is buy a non-life insurance policy.

Yes, only 1 in 100 people in India have a non-life insurance policy and 3 in 100 have a life insurance policy.

This can truly be disastrous.

And who better to reduce the impact of a disaster than the insurance regulator?

Yes, the Insurance Regulatory and Development Authority of India (IRDAI) is taking measures to increase insurance penetration in our country. How? 

ReadOn!

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🤔 Why is Insurance Super Important?

54.8% of our healthcare expenditure comes from people’s pockets and not insurance policies.

Result? In 2017 alone, 55 million people were pushed into poverty because of healthcare costs.

So, insurance is a need not a luxury. But why are Indians not buying insurance?

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📄Reasons For Not Buying Insurance

One major reason is the lack of affordability. 

In India, the average premium of a life insurance policy with a cover of Rs. 1 crore is Rs. 10,000-Rs. 22,000. 

Plus our per capita income is around Rs. 1,28,000. And the cost of the premium itself is around 10% of that number.

On top of that, we have to pay an 18% GST on our premiums, making them even more expensive.

So, for some people buying insurance is simply not a choice.

What’s more, insurance agents are mainly limited to urban areas and have not been able to successfully reach rural India, which is a huge chunk of the population. 

So, what’s the solution?

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💡IRDAI’s Plan

IRDAI is taking an indirect approach towards solving this problem: by making things easier for insurance companies.

You see, to make insurance accessible and appealing to everyone, insurance providers need to innovate.

But they have to comply with so many regulations that innovation becomes difficult.

So, IRDAI has been easing their burden.

For instance, it has allowed providers to “use and file” insurance products instead of “file and use”.

Earlier, before launching any insurance product or policy, insurance providers had to wait for approval from IRDAI, which could delay the launch by 6 months - 1 year.

But now companies can launch the product and then get approval from IRDAI, making things faster.

Now, this may not seem like a significant move but this will allow insurance providers to easily launch customised insurance products as and when they identify the need for them.

Wait, customised insurance?

Yes, a lot of people want to select the terms of the policies and the benefits according to their personal preferences.

The use and file rule will help them tap into this client base.

IRDAI is also reducing the number of reports and returns that insurance providers have to file.

Insurance providers earlier had to file up to 17 returns including financial statements, actuarial reports and so on. 

But now this number has been brought down to 8 returns for general and health insurers and 3 for life insurers.

It is also making things much easier for corporate agents like PolicyBazaar.

These agents can show you the policies of several companies but can tie up with only three providers to sell their policies to you.

But IRDAI is considering allowing them to partner with 9 insurance providers so that they can provide more products to consumers.

And it could also change the age-old rule which requires insurance providers to have Rs. 100 crores in capital to begin their business.

This has stopped many small companies from entering the insurance business.

These small companies would actually be better equipped to deal with the underpenetrated Tier-3, Tier-4 and rural crowd.

With these changes, IRDAI plans on increasing India’s insurance penetration from 4.2% to 8-10%.

But will these steps be enough?

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🧠 What Else Can be Done?

There is only so much the IRDAI can do. However, other steps also need to be taken to increase our insurance penetration.

For starters, the government could start educational programs to teach people how important insurance is. 

And it could also lower the GST applied to insurance premiums.

As a drastic measure, it could also consider making health insurance mandatory like vehicle insurance.

But the ball is not just in the government’s court. Insurance agencies too need to innovate, leverage tech to understand people’s needs and launch personalised marketing campaigns to target users.

They could also launch embedded insurance products: like flight and Covid insurance bundled with flight tickets, and mobile screen insurance bundled with the purchase of your phone.

India’s Insuretech companies are trying to do exactly this, but it will be some time before we can measure their exact impact on increasing insurance penetration.

Wondering what’s all this to you?

Well, all these points will ultimately benefit you and us.

You see, with a larger pool of customers, not only will companies be able to reduce insurance premiums, they will also be able to offer us better and more personalised products.

Plus, increased insurance penetration has a positive impact on our economy as well.

Here's to hoping that our insurance penetration increases.

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⚡In a line: Insurance penetration in India is super low, which means a huge chunk of our population is at constant threat of falling into a debt trap or poverty.

💡Quick question: What do you think will make more Indians buy insurance?

-Lower premiums

-More insurance players in the market

-Customisable insurance policies

- All of the above.

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