In a world full of uncertainty and unpredictability, insurance plays a pivotal role in empowering individuals with financial security for their families and businesses. Serving as a protective shield against unexpected events and unforeseen circumstances, it provides a safety net that allows people to manage risks and deal with difficult situations of their life- ranging from accidents and illnesses to natural disasters and property damage. Insurance, be it health, life, property, or auto insurance, acts as a robust defense mechanism against these unexpected shocks.
Insurance penetration in India
According to the Economic Survey 2022-23, insurance penetration in India has been steadily increasing. It increased steadily from 2.7 percent around the turn of the millennium to 4.2 percent in 2020 and remained the same in 2021. Life insurance penetration in India was 3.2 percent in 2021, almost twice more than the emerging markets and slightly above the global average.
“Important government interventions and a conducive regulatory environment have supported the growth of the insurance market, which has seen increasing partnerships, product innovations, and vibrant distribution channels,” Economic Survey noted.
The Survey also stated that the country is poised to emerge as one of the fastest-growing insurance markets in the coming decade. “India will be one of the main drivers of global insurance industry growth over the next decade. Indian Insurance Market is the 10th largest in the world and is poised to become the 6th largest by 2032, ahead of Germany, Canada, Italy, and South Korea,” it said.
Digitisation of insurance market
Like every other service, people in India can avail insurance services including insurance purchases online via many digital platforms. The Economic Survey said, “Digitisation of India’s insurance market, accompanied by an increase in FDI limit for insurance companies, is likely to facilitate an increased flow of long-term capital, a global technology, processes, and international best practices, which will support the growth of India’s insurance sector.”
Reduces stress while supporting mental wellbeing
Reduced anxiety and stress, stemming from financial worries, are often unintended but invaluable outcomes of insurance coverage. For example, out of pocket health expenditures are one of the major reasons for families being pushed into poverty. Promoting responsible financial planning, certain life insurance policies can accumulate cash value over time, acting as both protection and an investment tool. While, disability insurance safeguards an individual’s income in the event of an illness or injury, ensuring that financial obligations continue to be met.
Extending to the business world, insurance also protects businesses from unforeseen events that could disrupt operations or lead to financial losses. With insurance in place, companies can weather the storm of natural disasters, legal disputes, or unexpected challenges, ensuring that they continue to provide employment opportunities and contribute to economic stability.
Supports economic development
For a country’s economic development, Insurance plays a vital role. While it is an important safety net for individuals and businesses from unforeseen circumstances, it also provides a capital for infrastructure development. As pointed out by the Economic Survey, most of the insurance products that are sold in the country are savings-linked, with just a small protection component.
Initiatives by the government to drive financial inclusion in India including Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana) (AB PMJAY), Pradhan Mantri Fasal Bima Yojana (PMFBY), Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Suraksha Bima Yojana, have led to an increase in adoption of insurance. To further boost accessibility and adoption among the rural areas, Insurance Regulatory and Development Authority of India (IRDAI) issued IRDAI (Micro Insurance) Regulations, 2015. This provides a platform for distributing affordable insurance products for the marginalised sections of the population and promote financial inclusion.