Insurance penetration requires improving awareness and trust, say industry leaders ahead of National Insurance Awareness Day

The Covid-19 pandemic may have done what no amount of marketing by insurers has done but there’s still an urgent need to do more to create awareness, build trust, enhance ease of process, and improve access to boost penetration levels in India, the chief executives of several insurance companies said in an ET CEO Roundtable, ahead of the National Insurance Awareness Day.

Insurance penetration in India – measured as the percentage of insurance premium to GDP – has seen a steady rise to 4.2% in FY21, according to the Economic Survey 2022, but this still remains far less than the global average of 7.2%. Life insurance penetration in India was pegged at 3.2%, almost on par with the global levels of 3.3 percent, while non-life insurance stood at 1.0%, lagging the global penetration of 3.3 percent.

Ahead of National Insurance Awareness Day on June 28, at an ET CEO Insurance Roundtable on ‘Simplifying Insurance for India: Rethinking Products and Processes’, industry leaders Amit Malik, CEO and MD of Aviva Life Insurance Co Ltd, Satishwar Balakrishnan, CEO and MD of Aegon Life, Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, and Mahesh Kumar Sharma, MD and CEO of SBI Life Insurance deliberated on how Indian insurance companies need to leverage technology to drive insurance penetration in India and cater to the changing needs of customers.

At the ET CEO Insurance Roundtable – which is among a series of discussions that are part of
an ET.com initiative to boost financial literacy for the next billion users – the CEOs of insurance companies also highlighted steps that need to be taken to build greater customer trust in the insurance industry as well as improve access to insurance for Bharat or first-time online users from across beyond the metros.

Need for more awareness creation

Insurance in India has always been focused on traditional products from the beginning but it was due to the Covid-19 pandemic that people understood the need for insurance to ‘future-proof’ their lives, rather than looking at it merely as a savings tool or an investment product, Mahesh Kumar Sharma, MD and CEO, SBI Life Insurance, said at the panel discussion moderated by Miloni Bhatt, Digital Broadcast Editor, Economictimes.com.

Outlining the reasons for low insurance penetration in India compared to other countries, Sharma said, “One of the things that we need to rectify going forward, is to educate people about the importance of insurance in one’s life and the need to explain to them why insurance should be a part of their entire investment or future proofing philosophy,” said Sharma.

The increasing digital penetration in the wake of the Covid-19 pandemic as well as the resultant change in the consumer behavior is reshaping the insurance industry in India, with digitally savvy customers looking for personalisation and flexibility, among other facilities in their insurance products. Besides, a boom in the insurtech industry and an ecosystem push towards the use of new age technology like AI, big data, etc. is changing the way insurance has traditionally been provided in India.

Still, more needs to be done to improve insurance penetration among different sections of the population, including the self-employed, as a large percentage of India’s population currently exists outside of the insurance safety net, said Satishwar Balakrishnan, CEO and MD of Aegon Life.

Balakrishnan pointed out that close to 80-90% of the people in our country are not insured and even within the 10% population which is insured, a large chunk of it consists of people who are salaried. This means that insurance penetration is especially low among the self-employed section of the Indian population, which accounts for a significant portion of the working population.

Leveraging digital to reach Bharat

“This whole gap can be filled out only if we make insurance 1) very easy and 2) very accessible. And the only way we can reach out to this population is using digital. And digital is the only medium that I think can have the speed and the scale to reach our vast country and actually get into the interiors,” Balakrishnan said.

He further added that this was in fact based on the way digital has actually made inroads into a lot of rural and small towns in India. For example, rural India actually has a 20% higher presence of internet users than the urban parts of the country.

“Just to sum it up, if I actually look at the entire population, which is (made up largely of the) self employed and the larger population in the country, what we call as the Bharat space, those people are totally getting left out,” said Balakrishnan.

A study conducted by Policybazaar earlier this year – to understand the changing consumer sentiment towards insurance purchase, household finances, and investments over the last two years of the pandemic – also found that people from tier-2 and tier-3 cities are now showing an interest in insurance products.

Improving access to insurance

Beyond technology, there is a need for insurance companies to work towards building greater customer trust in the industry and improving access to insurance by rethinking various processes and rules, such as the GST rate for insurance products, the CEOs of various insurance companies said during the ET CEO Insurance Roundtable, launched as part of an ET.com initiative to boost financial literacy for the next billion Indian online users.

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Sharing his views on the 18% GST rate, Amit Malik, CEO and MD of Aviva Life, said that it is vital that the GST rate be reconsidered for insurance products.

“ The new chairman of the regulator has laid out a vision of saying, ‘insurance for every Indian,’ which is very good and it’s very positive. To expand the market, I think it’s important that there is a prudent call that is taken as to what’s the right GST percentage there, (which) will surely make the product more accessible,” said Malik.

Echoing similar views, Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, said, “I strongly believe that things which are for social good can’t have high GST. If you look at GST for healthcare, which is much lower, and health insurance (which is at) 18% GST, there is a clear mismatch. I think that has to be looked into and is not something that we should be shy of talking about.”


Building trust in the industry

On building customer’s trust in the insurance industry and simplifying the whole claim settlement process, Singhel said that the problem for the industry to solve is to actually make the process of claiming payments frictionless for customers.

“Let’s say, 20 to 40 years back, you had no means but to send physical people to be there to look into stuff; you had no means to be able to process claims in a frictionless manner because now when you have cameras all across, you have digital submission of documents, you have so many evidences which is there, you can make the process of claims very frictionless and very straightforward,” said Singhel.

“So I think the problem to solve is how do you make the process of claims so frictionless that the customer feels, ‘wow, it was so good to insure’. The industry is paying claims, it’s not that they’re not paying claims. It is the frictionless part, where the trust part comes in, that needs to be solved,” Singhel added.

Insurance customers on digital today enjoy better service due to end-to-end digital experiences that leverage technological applications, which, in turn, is expected to drive growth for the industry. The insurance market is expected to reach nearly $222 billion by fiscal 2026, with new online distribution models such as business to consumer (B2C), business to business (B2B), and business to business to consumer (B2B2C) set to be key drivers of growth, according to a recent RedSeer report.

To be clear, the CEOs of Indian insurance majors agree on the need to leverage technology to reach large swathes of the population and fulfill the insurance regulator’s goal of providing insurance for every Indian.

For more such conversations that are part of the ET.com initiative to promote
Financial Literacy for the Next Billion
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