India’s current insurance penetration rate stands at 3.42%, far below the global average of 6.2%, says an industry report. “A 1% rise in insurance penetration translates into 13% reduction in uninsured losses-an increased investment equivalent of 2% of national GDP and a 22% reduction in taxpayers contribution,” stated the report ‘Transformative Agenda for The Indian Insurance Industry and its Policy Framework’, jointly authored by H Ansari, former member (non-life), Irdai, and leading insurance expert Arun Agarwal. The report also said the existing regulatory framework of the insurance industry is insufficient to promote insurance penetration and density significantly despite the government’s objectives to have a country with full insurance and pension penetration.
The report, which is provided to the insurance regulator and finance ministry, focuses on key areas that need to be addressed from a policy, regulatory and market development perspective. “The regulatory framework and support tends to over-regulate, predictably the cost of compliance is high. Besides the regulatory policy is less development oriented,” said Arun Agarwal during the press conference.
With 17% of the worlds population, the Indian insurance market accounts for less than 1.5% of the worlds total insurance premium as India is both under-penetrated and inadequately penetrated. General insurance companies had seen gross direct premium at Rs 1.27 lakh crore a growth of 32% in financial year 2016-17. Sharp growth in the non-life sector was largely due to the growth in health and motor insurance along with new crop insurance scheme, says market participants. While life insurance industry saw its new business premium at Rs 1,75,021.89 crore as on March 2017 as compared to Rs 1,387,60.47 crore in March 2016 a growth of 26.13%.
The report concluded by saying that, it is regulators who have to set up to the plate. It is the time to transform- in thoughts and actions. “This also means outcomes need building coalitions, creating specialized knowledge, less hierarchy, more collaboration and flatter professional structures,” said the report.