Overall, insurance penetration, which is the ratio of premiums underwritten in a year to the gross domestic product (GDP), surged from 2.71% in 2001 to 5.1% in 2010, but slipped to 4.1% in 2011 because of the economic slowdown, which has affected life insurance the most. Insurance penetration reflects the level of development of the sector in a country. Life insurances penetration grew from 2.15% in 2001 to 4.6% in 2009, but it started slipping from 2010 and stood at 3.4% in 2011. The penetration of the non-life insurance sector in the country has remained near-constant, in the range of 0.55-0.75%, over the last 10 years.
At a recent conference organised by the Asean Institute of Insurance and Risk Management (AIIRM) in the capital on insurance penetration through research and education, industry captains stressed on the importance of reaching out to rural India by developing products suitable for local needs and increasing the penetration of both life and non-life products. Experts also said the current financial inclusion mission of the government would be a non-starter if insurance products do not reach rural customers.
AK Roy, chairman and managing director, General Insurance Corporation of India (GIC Re), underlined that the free fall in tariffs of non-life insurance products is not sustainable and corporate clients are paying far below the cost. He also stressed on the importance of robust technology in reaching out to the masses, which could push up the penetration of insurance products, especially in rural areas.
Companies should launch pilot projects in rural areas, modify them according to the inputs and introduce products across the country, he said. He added that as the industry does not have well-trained agents to sell products across the country, research must be undertaken to train them as agents play a big role in promoting the business and create self-employment.
PK Behl, former executive director, LIC, and member of advisory council, AIIRM, says customer-friendly products do not come from actuarial calculations but from field work, which brings customers needs to the fore. He also said that innovation and research are needed in the insurance sector as customers need a thorough analysis.
The annual AIIRM conclave provides a platform for industry captains to dwell on issues pertinent to research and innovation in the insurance industry. The conclave stressed on the need for developing an institution catering to the educational needs of the country as research and education in insurance can help boost insurance penetration.