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Market Survey




In India’s population of 1.3 billion people, the number of lives insured is only about
15 per cent. With such a large untapped population base, the importance of insurance is
unquestioned and all emphasis needs to be on imparting insurance awareness education and
sharing knowledge. For a robust growth and deep penetration of the insurance business, the
key to success lies in dissemination of information and learning.

he insurance indus- through industry/mutual arrange- and the insurer. The insured looks
try in India has gone ments, or passing on the risk to an at risks and impact for appropriate
through many transi- insurer. His choice depends on the treatment to mitigate and control
tions, the latest being industry players, schemes available, losses and to obtain maximum re-
the opening up of the nature and types of risks, costs in- coupment. On the other hand, the
sector to private and international volved, associated risks, probability insurer looks at risks to develop
players. With this, the monopoly of of occurrence, likely impact on busi- products and address the needs of
the public-sector nationalised insur- ness and risk appetite, the approach the insured and earn a fair return by
ance companies has been replaced and attitude. Insurance companies way of premiums that will give him
with competition—albeit in a space that recognise this and are proactive profits or surplus over and above the
regulated by the Insurance Regu- in managing and tuning their busi- claims’ settlement.
latory and Development Authoriy ness to customer needs will prove The approach of the insured is
(IRDA)—thereby giving a choice for most successful in today’s competi- from an individual perspective, and
the first time to the insured. tive environment. that of the insurer from a macro per-
Insurance, described as ‘a subject spective. Both are looking at risks
matter of solicitation,’ has now be- Insurance life-cycle and outcomes—one from the loss
come a matter of persuasion in In- perspective and the other from the
dia. The customer today can choose The life-cycle of insurance can be claims perspective. The relationship
between insuring and not insuring, viewed and analysed from two per- is mutual, symbiotic and interde-
between bearing the risk himself or spectives: the consumer (insured) pendent. It envisages a better under-

Insurance approach of the insured (individual level)

Insurance approach of the insurer (macro level)

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Market Survey
Table I larly. Insurance premiums in veals that insurance penetration in
India are expected to grow India was 4.74 per cent in 2008-09
Premium Underwritten consisting of 4.17 per cent in life
by almost 15 per cent in the
India World current financial year and business and 0.57 per cent in non-
(US $ million) (US $ billion) touch a total premium in- life business. India’s position vis-à-
Total premiums 56,190 4,270 come of Rs 2,900 billion. vis other Asian countries in respect
Life premiums 48,860 2,491 these predictions are of insurance penetration and density
Non-life premiums 7,329 1,779 bound to come true, going is shown in Table II.
by the trends in the cur- It is worthwhile to note here that
Source: Annual Report of IRDA, 2010
rent insurance premium while the developed economies have
underwritten in shown a decline of 5.3 per cent in life
Table II India and the premiums and 1.9 per cent in non-
insurance pen- life premiums, the emerging mar-
Insurance Penetration in Select Asian
etration in India kets have shown an increase of 15
Countries vis-a-vis the
World Leaders in 2008 compared to the per cent in life premiums and 7.1 per
world insurance cent in non-life premiums. As per
Countries Total Life insurance Non-life insurance market (see Ta- the figures released by IRDA, the
Japan 9.8 7.6 2.2 ble I). Compared Indian life insurance industry re-
Singapore 7.8 6.3 1.6 to other insur- corded a premium income of Rs 2218
India 4.6 4.0 0.6 ance markets, billion during 2008-09 as against Rs
India’s contribu- 2013 billion in the previous financial
Malaysia 4.3 2.8 1.5
tion seems to be year, recording a growth of 10.15 per
Thailand 3.3 1.8 1.5
negligible. Nev- cent. The non-life insurance indus-
PR China 3.3 2.2 1.0
ertheless, the try underwrote a total premium of
Sri Lanka 1.4 0.6 0.9 figures suggest Rs 303 billion in 2008-09 as against
Phillipines 1.4 0.9 0.5 that there is an Rs 278 billion in 2007-08, registering
Indonesia 1.3 0.9 0.4 immense scope a growth of 9.09 per cent.
Pakistan 0.8 0.3 0.4 for coverage and
United Kingdom 15.7 12.8 2.9 expansion. Need for insurance
Taiwan 16.2 13.3 2.9 education
South Africa 15.3 12.5 2.9 Insurance
The insurance density of In-
Source: Annual Report of IRDA, 2010 penetration
dia and other countries is shown
For any econ- in Table III. in a population of 1.3
standing of the risks, their likelihood omy, the level of insurance activity is billion people in India, the number
and impact, and the needs and pain measured by insurance penetration, of lives insured is only about 15 per
points of consumers. that is, the insurance premium col- cent. With such a large untapped
lected as percentage to the country’s population base, the importance of
Premium underwritten GDP. Increase in a country’s GDP insurance is unquestioned and all
signals an increase in income levels emphasis needs to be on imparting
Like every other dynamic indus- and hence insurance penetration. insurance awareness education and
try, the life and health insurance in- The higher the country’s income, sharing knowledge.
dustry has many functions and inter- the other things being equal, the For a robust growth and deep
relationships. Activities associated more the spending on all types of penetration of the insurance busi-
with marketing of a product, assess- insurances. Thus, for India, where ness, the key to success lies in dis-
ing risk and issuing policies, obtain- some 200 million citizens are be- semination of information and
ing reinsurance, handling claims and lieved to be in the middle- to upper- learning. Worldwide, in mature in-
providing customer service are highly income range, insurance demand is surance markets, there is a strong
specialised and need a thorough un- likely to surpass all conservative es- commitment to insurance education,
derstanding of the subject. timates. It is bound to take off with leading to better understanding and
In tandem with robust economic rising awareness about the need for requirement assessment. It is es-
development, insurance markets in insurance. tablished through various research
India are expected to grow spectacu- The latest Swiss Re report re- projects that the more educated or

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Market Survey
literate a household, the greater the Table III areas as well.
likelihood of understanding the need Enabling the
Insurance Density customer in tak-
for insurance protection. IRDA to-
gether with industry participants is Countries Total Life insurance Non-life insurance ing informed de-
working hard to improve awareness Australia 2008 2,038.00 1,348.60 cisions is not only
about insurance and its importance 2007 1,674.10 1,326.10 a matter of ethics
to society by and large. but also makes
Brazil 2008 115.40 129.10
Considering the unlimited extent better business
2007 95.30 106.90
of market potential, there is a need sense. A custom-
to spread insurance education to UK 2008 5,582.10 1,275.70 er with the right
the general population advising on 2007 5,730.50 1,383.20 risk perception is
the benefits of insurance and guid- USA 2008 1,900.60 2,177.40 always likely to
ing them on assessing their require- 2007 1,922.00 2,164.40 buy more insur-
ments. It is equally important to im- Japan 2008 2,869.50 829.20 ance and, more
part quality insurance education to 2007 2,583.90 736.00 importantly,
the personnel of the insurance com- India 2008 41.20 6.20 continue buying
panies to ensure right selling and 2007 40.40 6.20 insurance over
quality service deliveries to clients. a period of time.
Source: Annual Report of IRDA, 2010
Let us cover all of them one by one. Customer dis-
sonance, which
Insurance knowledge for tion, the returns generated by such is a major issue in insurance, arises
campaigns in terms of increased mostly because of lack of proper clar-
an individual
insurance penetration will be much ity (if not mis-selling) at the point of
Financial literacy can empower more than the costs involved. sale. Utmost good faith is a recipro-
individuals to optimise their spend- At the micro level, point of sale is cal obligation. Just as we expect the
ing within specified budgets thereby ideal for imparting consumer educa- consumer to take a long-term view
making room for systematic invest- tion as the consumer is fully atten- on insurance, intermediaries and in-
ments, managing debt, and making tive at this point. A well-informed surers also need to go beyond short-
strategic investment decisions for consumer would bear a bigger busi- term goals of bracing for big volumes
their health and retirement plan- ness potential and should not be con- quickly.
ning. Education will also prevent sidered a threat. As the consumers become more
them from becoming involved in informed on the availability of prod-
transactions that are financially de- Insurance knowledge for ucts, it becomes imperative for all
structive. sales teams to provide competent
an advisor/agent
Insurance literacy provides to an professional advice. The ambit of ser-
individual the ability to analyse per- The supply side needs to under- vices now does not remain isolated
sonal risk factors that affect his ma- stand that insurance selling is much to providing insurance cover but ex-
terial well being. Separate strategies more than pushing a product in the tends to complete financial planning
for rural and urban consumers have market or just ‘closing a deal.’ In- for the client—from tax planning to
to be devised. Media like television surance caters to only one area of investments. an insurance advisor
and the Internet can be extensively the risk quadrant and in order to needs to develop a strategy for the
used in this regard. Cues can be tak- optimise the benefits of insurance, clients to build and manage their
en from social marketing campaigns the consumer needs to understand wealth and make it grow. The ‘agent’
like ‘Pulse Polio’. risk handling techniques for non- acts like a catalyst doctor who can in-
In the recent past, many insur- insurable risks as well. In other stantly find the right pulse of his pa-
ance schemes have been launched words, apart from transferring the tient and provide immediate advice
by the government. The Rashtriya risks, an individual has to learn and treatment. Understanding the
Swasthya Bima Yojna (RSBY) is one about retaining, controlling as well customer—his personal characteris-
such example. Insurance awareness as avoiding certain risks. Only then tics like age, marital status, health,
campaigns can be clubbed with such the benefits will flow in a percepti- dependents, as well as his financial
schemes to ensure better outreach ble manner. Being a vital player of situation, his attitude including risk,
as well as increased risk conscious- the game, an insurance salesperson total income, tax payable and other
ness among the population. As a na- should give important tips on these financial assets and obligations—is

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Market Survey
essential for the advisor to chalk out rather than just painting a rosy pic- vironment for providing insurance
a relevant financial plan. As such, ture about the coverage and services education with active participation
‘versatility of financial knowledge’ is offered, it will be in the interest of from all—government, private, in-
the key to success. everybody to explain the limitations dustry and non-profit organisations.
In a country like India where (or exclusions) of the product and Consumer education, however,
the medium of sale remains pre- also the precept underlying these is not an issue that can be dealt
dominantly through the advisors, limitations. through regulation alone. Neither
knowledge enrichment is vital to is it something that can be taken up
the growth and sustenance of the in- Affirmative action needed as a project and finished once for all.
dustry. Eighty per cent of the indus- It calls for a mature behaviour and
try’s business is still being procured The education system now allows affirmative action on the part of the
through the agents. To maintain the students in the senior secondary industry. It has to become a part of
same, it is important that they are stage to opt for subjects related to the culture that is driven by the con-
constantly groomed and trained to insurance and banking. With time, viction that a risk-literate consumer
match up to the consumers’ expecta- it will be realised that basic princi- is in the interest of one and all in the
tion levels. ples of insurance need to be empha- industry. Fair play is not a one-way
Intermediaries and salespersons sised and taught at the primary level process—neither is foul play.
need to be trained in an effective too so as to provide them with the 
manner. Rather than mere product basic knowledge to determine need
detailing, they should be assessing analysis for personal and financial J. Vimal Priyan is an assistant professor
the risk appetite of the insured and security. Insurance remains a big op- in PG commerce at Ayya Nadar Janaki
Ammal College, Sivakasi, and V. Karthi-
suggesting products accordingly. portunity in India and there exists hai Selvi is a UGC major project fellow at
Even while detailing the product, an imperative need to build an en- V.H.N.S.N. College, Virudhunagar

30 FACTS FOR YOU • March 2011