ACCESSIBILITY OF INSURANCE IN INDIA

First, let us keep one thing in mind i.e. Insurance is not just risk management.It is also an instrument of social security.It is not just meant to be for prosperous and civilized people in rich and developed countries.It is much more crucial for the less well-off for the emerging economies like India.Unfortunately, India has a status of a country which is under-insured.India’s insurance depth measured as the percentage of insurance premium collected , as a percentage of GDP, stand out at just 3.9 percent, which is much less than the average insurance penetration of a developed country which is around 9 percent.With 3.9 percent insurance penetration, India stands sightly ahead of China, which has insurance penetration of 3 percent.When it comes to “insurance density” measured as per capita insurance premium, India stands much backward with a value of $53 whereas, the advance country average lies between $2,000 to $7,000.By this measure, even China outscores India with having an insurance density of $178.

The lagging behind of India and China (on the key measures of insurance coverage) when compared to advance countries could be easily reasoned.Some of the reasons are:
*Both markets were long the exclusive domains of state-owned companies.
*Both countries have recently and only partially liberalized foreign investment.This is the major cause behind the  small market share of the foreign insurance companies.

India’s insurance market is not competitive enough.Markets being almost oligopolistic in nature facilitate handsome profit making for the companies, especially state-owned,and they have little incentive to reach out to the masses which are overly under-insured.

Our government has shown strong commitment to extend the coverage of insurance to India’s poor, in the Union Budget.The new insurance schemes have been announced in the Budget for lower income groups as part of the governments attempt to formulate a comprehensive social security system.A premium of just RS 12 a year will bestow an individual with an accident insurance worth RS 2 lakh, under the Suraksha Bima Scheme.Under the Jeevan Jyoti Bima Yojna, an individual can get a life insurance cover worth RS 2 lakh, just by paying RS 330 per year.The state-owned insurance companies, like LIC and GIC, will roll out these schemes.

Even so, there is so much more, the government can do.Insurances other than life and accident too are the need of the hour, especially for the low income groups.For example, health insurance for every citizen, crop insurance for every farmer etc.But the problem lies in the inability and unwillingness of insurance companies, state-owned as well as private companies, to serve to a larger market.To eradicate this problem, the companies need to be subject to competition, and should have the knowledge to introduce innovative products and the financial might to stay the course in a tough market.The only investors who are capable enough to do this are foreign investors.They have a superior knowledge of products, as they invest their funds across the globe and hence, they understand the market better.They hedge their risk by diversifying their risk market i.e. investing globally.So, if they come, they will offer a premium at a lesser cost compared to Indian insurance companies.Affordability will also increase because of the the presence of the foreign insurance providers.So, if insurance is to extended, the government has to liberalize in an aggressive manner.

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