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Government schemes helped boost insurance reach

IRDAI has undertaken various initiatives for boosting insurance reach. (Photo: iStock)Premium
IRDAI has undertaken various initiatives for boosting insurance reach. (Photo: iStock)

The Survey said that insurance penetration in India increased steadily from 2.7% around the turn of the millennium to 4.2% in 2020 and remained the same in 2021. Life insurance penetration in India was at 3.2% in 2021, almost twice more than other emerging markets and slightly above the global average

New Delhi: Government schemes and financial inclusion initiatives have driven insurance adoption across segments, according to the Economic Survey 2022-23 tabled in the Parliament on Tuesday.

The government’s flagship initiative for crop insurance, Pradhan Mantri Fasal Bima Yojana (PMFBY), has led to significant growth in the premium income for crop insurance. Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana) (AB PMJAY) aims at providing a health cover of 5 lakh per family per year for secondary and tertiary care hospitalisation.

Insurance Regulatory and Development Authority of India (IRDAI) has also undertaken various initiatives for boosting insurance reach, such as permitting insurers to conduct video-based Know Your Customer (KYC), launching standardised insurance products, and allowing insurers to offer rewards for low-risk behaviour. Important government initiatives, strong demographic factors, a conducive regulatory environment, increased M&As, product innovations, and vibrant distribution channels are supporting the insurance market’s growth, as per the survey.

For instance, Ayushman Bharat Yojana provides health coverage of 5 lakh per beneficiary family per annum to poor and vulnerable families identified based on select deprivation and occupational criteria. Under Pradhan Mantri Suraksha Bima Yojana scheme, risk coverage of 2 lakh for accidental death and complete disability and 1 lakh for partial disability is given to beneficiaries.

The Survey also said that insurance penetration in India increased steadily from 2.7% around the turn of the millennium to 4.2% in 2020 and remained the same in 2021. Life insurance penetration in India was at 3.2% in 2021, almost twice more than other emerging markets and slightly above the global average. However, most life insurance products sold in India are savings-linked, with just a small protection component. Hence, households remain exposed to a significant financing gap in the event of the premature death of the primary breadwinner. Be that as it may, insurance density in India has increased from $11.1 in 2001 to $ 91 in 2021 (density for Life insurance was $69 and Non-Life insurance was $22 in 2021) in keeping with the relatively faster expansion of the insurance market in the country.

During FY22, gross direct premium of non-life insurers, within and outside India, rose 10.8% year-on-year (YoY), primarily driven by health and motor segments. Net incurred claims of non-life insurers stood at 1.4 lakh crore in FY22, primarily driven by rising per capita income, product innovations and customisation, development of strong distribution channels, and rising financial literacy. The life insurance premium registered YoY growth of 10.2% in FY22, with new businesses contributing 45.5%of the total premiums received by the life insurers. The life insurance industry paid benefits of 5.02 lakh crore in FY22, out of which 8.3% were on death claims.

To facilitate the penetration of insurance to lower income segments of the population, the regulator issued IRDAI (Micro Insurance) Regulations, 2015, which provide a platform for distributing insurance products that are affordable for rural and urban poor and promote financial inclusion. In FY21, 10.7 lakh new micro-insurance policies were issued to individuals with a new business premium of 355.3 crore (in the life-insurance segment), and 53,046 new microinsurance policies were issued in the general insurance segment (excluding standalone health insurers), as per the Survey.

ABOUT THE AUTHOR
Navneet Dubey
Navneet Dubey is a personal finance writer and artist. Over the past decade, he has written feature stories on insurance, financial planning, lending and borrowing.
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