CEC- IRM 

(4539223)

Issues and Challenges faced in

Insurance Industry
SEM III | MBA (FINANCE) 
Under the guidance of,
Prof. Iramada khan

By:
Bansari Datta (2143)
Vrajeshwari Yadav (2163)
The growth of the insurance sector In
India in recent past…
CURRENT INSURANCE INDUSTRY SCENARIO

Survey released by the

India is ranked 11th Ministry of Finance, only 3
in global insurance people out of 100 have a life
business. (Nov. 22) insurance policy in India.

India’s share in global

India Insurance insurance market was 1.72%
market stands at during 2020 and total
$131 Bn as of FY22. insurance premium volume in
India increased by 0.1%
 24
Life- Insurers

58
Insurance
Companies
34
Non-Life
Insurers
Source:Business Standard
 INSURANCE SECTOR
ISSUES AND
CHALLENGES
The factors that are creating challenges
in the sector currently:
1. Emerging technologies
2. Changing customer expectations
3. Customer’s financial situation.
• The high cost of living is a major hurdle.
• Real earnings have been flat over the last decade.
• Household indebtedness and unsecured consumer debt actually increasing.
• With such a significant portion of earnings flowing into debt, it is little surprise that any
savings or investing in life insurance takes a backseat.
4. Economic instability:
• When the country`s economy is down, all insurance companies get affected.
• The rates get affected which force companies to increase their rates.
• No client will appreciate this, even if it is stated clearly in the contract that the insurance
rates might change from time to time.
• This situations might create a bad image for a company.
• Thus, make costumers spread the information about a service or product they were not
happy with very fast.
5. Competition:
• Many insurance firms on the market.
• Each company looks for the best way of selling their insurance products.
• Targets a particular group of individuals.
• New ones are the most doubted companies. (Operate between the thin line of- failure and
success).
People trust some of the existing insurance firms compared to the new businesses .
• No one will want to take such risks with the little among of money that they have.
 Source: Business standard

In insurance sector the Public sector is still dominating after even a decade of
opening the doors of this sector. This situation does put some burden on the
private sector companies to innovate and differentiate themselves so that they
could have a better share in the market.
Challenges
in the Insurance sector:

• Less accessible to people in rural areas

1. Accessibility and lack of financial literacy

• Reasons, including pricing and lack of awareness

• A need to build trust and improve financial literacy

Government insurance schemes such,

….have played a significant role on this front, and have led to better coverage.
2. Low penetration and density rates:
Market with few
buyers and few
sellers

Lower
High Prices Insurers
penetration
3. Deficient rural participation and life
insurers’ skewed focus on urban areas:

Concentration of
insurance providers in
urban areas has
increased.
Reduction in the
number of private
life insurers in rural
areas
Additionally, only about five percent of Indian household savings are held in financial assets.

Rather than investing in ex-ante insurance against risks, households rely on ex-post
high-cost borrowing, keeping the penetration rates of insurance low, especially in rural
India.
Number of offices of life insurers by different geographical areas:

Source: Handbook on Indian Insurance Statistics F.Y. 2018-19, IRDAI

4. Lack of adequate capital investments:

Low insurance inadequate capital Expansion to the

penetration with insurers unpenetrated markets
• Additionally, the COVID-19 pandemic only made things worse.

• The insurance sector saw its profits plummet significantly through 2020.

• While some PSU insurers saw an increase in their net profits in FY21, resulting in a
decline in underwriting losses, most are still reeling from the aftermath of the
pandemic.

• The sector has lost its pricing discipline, and even less attention is being paid to the
rural insurance market, given its lower potential to generate profits.
5. Predominance of traditional products and
distribution channels
6. Regulation and supervision:enforcing IFRS 17
• IFRS 17 affects many company that writes insurance contracts
• The International Accounting Standard Board (IASB) issued IFRS17 in May 2017, with an
original effective date for the annual period beginning on or after 1 January 2021.
However, the effectivity date has since been shifted to reporting dates beginning on or
after 1 January 2023.
• IFRS 17 will provide increased transparency and greater comparability about the
insurance companies’ financial stewardship and performance.
• Challenges faced by insurance companies in the implementation of IFRS 17 are the
following:
 Increased balance-sheet volatility
 Implementing IFRS 17 by 2022 will mean heavy expenditures on external, skilled
resources to plug the capacity gap as well as investments in data and IT.
 Internal capabilities
 Will require increased granularity in financial reports.
7. Issues pertaining to crop insurance:
• The primary sector of the Indian
• Agricultural production is heavily dependent on external factors such as climate.
• 7Th rank in vulnerability index among 181 countries.
• In India, the government supports public sector insurance companies by: a)
bearing fully or partly the cost of administration; b) sharing a part of the
indemnity, or paying a part of the premium to enable the farmers to buy
insurance.
• Given the high level of subsidies and the state-monopolised administrative
machinery, some fear that the private sector will be unable to compete with
government insurance
THANK YOU 