No one can deny that the last decade have been kind to the complete insurance sector in India. The overall insurance saturation has reached 2.71 per cent in 2001 to 3.69 per cent in 2017 in India.
Gross premiums on paper reached Rs 5, 78,000 crores ($82.8 billion) in the year 2019, with, Rs 4,08,000 crore ($58.5 billion) from life insurance and Rs 1,69,000 crore ($24.3 billion) from non-life insurance sector in India.
Few vital aspects that have contributed to this growth are enabling policy reforms, increasing embracing of technology, positive demographics changes and increasing education. Going forward in this fashion, the Indian insurance industry is likely to continue growing at a strong clip, reaching a market size of Rs 19,56,920 crore ($280 billion) by the end of year 2020.
Why is the insurance industry crucial to the economic development and growth of a country?
- The insurance industry boosts up risk taking while at the same time securing its growth.
- Furthermore, since the assets under management of insurance companies represent long-term capital, they act as a pool to invest in long-term projects like the infrastructure development.
- Insurance plays a fundamental role in the rising the overall economy of a country.
- It further protects the future earnings and savings of individuals and companies.
- It enables risk transfer and smoothes out the risk patterns, thereby shielding the GDP of a country.
- Since measuring the premiums as a percentage of GDP and determining the level of penetration is not appropriate, the premiums are fees to protect the GDP. Relatively, an appropriate measure would be required to see what proportion of the GDP the sums guaranteed cover.
In this manner with the fullness of time, adequate penetration should be measured by the following approach:
- The total life insurance figures assured should be approximately around 5–10 times of the total incomes generated.
- The total assets and liabilities earned by the economy should cover up to approximately 80–90%.
- The compactness of insurance should be taken into consideration as per the average percentage of people above the poverty line who are insured.
- Ultimately, the percentage of the population covered by government and social schemes should be considered.
The mass conglomeration of the above figures will provide an accurate and exact assessment of insurance penetration. Although India might still feature among the low penetration economies, some surprises may be in store for all. At last, simply adopting technology and automating the processes will not eliminate or eradicate inefficiencies. New technology gives birth to new capabilities and processes should be redesigned consequently to reduce wastage and glee customers
A change in overall approach is the need of the hour whereby technology should be viewed as a fundamental business tool rather than just an operational and process tool. The natural inhibition in a regulated industry can be doled out with if organisations work with all stakeholders, including regulators and the Government. The hale and hearty interest regulators are showing in sandboxes bodes well for the industry.
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