Life insurance penetration (calculated as a % of the premium to GDP) in India jumped to 3.2% post COVID19 at par with the global average of 3.3%. However, general insurance is at just 1% penetration, far behind the worldwide average of 4.1%.
Lack of awareness and accessibility are amongst the top reasons for low penetration. COVID-19 created mass awareness of the risks involved, which made ignoring Life Insurance difficult. High treatment costs triggered Health Insurance purchases. So, can mere awareness and accessibility solve this problem of low penetration of general insurance products?
Market Opportunity for General Insurance
Roughly 50% of the Indian population does not have health insurance. 80% of the insured population is covered under some government scheme. Nearly 57% of the vehicles on Indian roads are uninsured, with two-wheelers forming the largest vehicle segment without insurance (66%), even though it is mandatory to have insurance.
The opportunity is undeniable. Digging deeper into the customer segments will further highlight where the pot of gold may be.
- Roughly 10% of the Indian households are the affluent segment whose annual income exceeds ₹1,000,000 and has almost 90% Insurance penetration through Car, Health, Home, and Travel Insurance.
- 30% of the Indian households are the struggler segment with an annual income of less than ₹200,000 and have nearly 70% insurance coverage under some form of a government scheme
- 60% of the Indian households are the aspirer segment with an annual income between ₹200,000 – ₹1,000,000. This segment is the least penetrated except for those covered under some Employer Mediclaim or ESIC.
Clearly, the Aspirer segment is where the potential exists. But this segment is aware of insurance, and the products are easily accessible. This segment also has direct access to insurance products through the internet. So what’s holding the growth here?
The Aspirer segment does not own a car; very few travel internationally and do not visit expensive hospitals. This creates a dissonance with the retail products marketed by insurance companies. The stakeholders from the Insurance sector we spoke to believe ‘the aspirer segment is miserly and will not spend money on buying insurance’. But is that true?
Two-Wheeler owners are a more significant part of the Aspirer segment. They represent an audience moving towards insurance adoption as two-wheelers very often represent financial prosperity and security. Understanding them can unlock the category itself.
At GarageWorks, we spoke to almost 5500 customers who get their two-wheelers serviced through our platform. 98% don’t have two-wheeler insurance. With an average annual spend of ₹2000/- on service & maintenance, it was hard to believe that they are ready to risk a brush with the law and not buy insurance which can cost as low as ₹828/-, approximately 60% cheaper than the cost of service.
On deeper investigation, we received three primary responses:
- Why should I waste my money? Police never ask for it. They only check for RC, License & PUC
- I drive carefully, so it’s a waste of money
- It’s better to spend from my pocket rather than haggle & struggle with the Insurance company to avail a claim
People don’t see value for money in buying insurance. The underwriters & the distributors need to understand that for this consumer, value for money is as essential as Insurable Interest is for the Insurer.
Tangibility is the Key
Life insurance offers term life where a fixed amount is promised in case of natural death, and there are returns in case of Endowment plans or ROI benefits in case of ULIPs. The aspirer segment will not spend money on something without tangibility. General Insurance products do not offer such tangibility.
Tangibility in General Insurance could be a tangible fear or a tangible return. Covid-19 is a good example. Tangible fear is purely incidental, and one never wishes to experience it. Tangible returns are the benefits customers can avail of by purchasing the insurance, like a consolation prize if the customer doesn’t claim. Currently, the industry doesn’t offer any such consolation prize. At best, it provides a discount on the next premium. However, discounts are not a consolation prize. It’s still an expense for the buyer.
An example of tangible benefit is where a full-body health check-up is offered in case of buying a two-year or a higher sum insured health insurance policy. The concept is not unknown. So why can’t this be enabled across product lines in the non-life sector?
If insurance companies can rejig their budgets to pull customers by offering them tangible benefits such as fixed returns or equivalent benefits of purchasing an insurance policy but not availing a claim, the possibility of adoption can be improved.
(By Shishir Gandhi, Co-Founder, GarageWorks)