1st Prize Winner – Shri Devaraj Belke Mahadeva, NIA, Pune INCREASING INSURANCE PENETRATION IN INDIA Insurance as an industry has secured a vital position in the development of the nation’s economy. An efficient insurance market is essential to achieve integration into the global economy and sustainable strong economic growth. In conjunction with the forces of global consolidation, current advances in information technology and the potential of e-business mark the beginning of a veritable efficiency revolution in the insurance industry. One of insurance's key roles is safeguarding the financial health of small and medium-sized enterprises. In addition to the protection provided by social security systems, insurance cover is crucial for people to insure themselves against inability to work, set aside money for retirement or protect themselves against the loss of their assets. Insurance reduces the investment risk faced by companies and the state. Many companies find it far more expensive, if not impossible, to take out a loan without purchasing the requisite insurance protection. Insured, thereby reduces the costs of raising the capital they need. By reducing investment risk, insurance can also encourage companies to think more long term and increase their risk tolerance. A lot of investments in new production facilities and newly founded companies would never happen if every company was required to have the necessary financial means to make good every conceivable loss. While arguable, it is no exaggeration that the availability of insurance is sometimes being heralded as a factor of production in itself. Hence Insurance has a huge potential to have a greater market share. All factors are in place for the Indian insurance industry to blossom into one of the fastest growing financial services markets in the world. The still nascent market is at an inflection point—rising incomes driven by economic growth are boosting demand, and increasingly sophisticated consumers with differing needs are driving some differentiated plays. For companies wanting to address this opportunity, a “Even me” approach will prove insufficient. To emerge as winners, they must re-examine their strategies and commit to a few bold, breakthrough approaches. This will not only put them in pole position in the race for customers, but will also help them build sustainable and profitable businesses. India’s life insurance market has grown rapidly over the past six years, with new business premiums growing at over 40 per cent per year. This impressive growth has been driven by liberalisation of the sector, that enabled the entry of a host of new players with significant growth aspirations and capital commitments. These players have contributed to the sector’s development by significantly enhancing product awareness, promoting consumer education and information, and creating more organised distribution channels. In urban areas, penetration of life insurance in the mass market is about 65 per cent, and it is considerably less in the low-income unbanked segment. In rural areas, life insurance penetration in the banked segment is estimated to be about 40 per cent, while it is marginal at best in the unbanked segment. This will change as India sees strongly accelerating household income and a more favourable
demographic profile over the next two decades. This will accelerate insurance penetration and per capita coverage. Adding to the growth driven by sheer economics is the demand for long-term savings and investment products—a gap met by insurance for the Indian consumer. Consumers rank life insurance higher than other investment options because of its ease and convenience in investing, tax benefits, and protection. Among all financial products in India, life insurance enjoys the highest popularity and demand. Contrary to the conventional directly correlated risk–return relationship, Indian consumers perceive life insurance as a low-risk and high-return...
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