There is a need to set up an insurance index in India for insurance penetration to be quantified as a measure of financial and social progress as it is not enough to limit the study of insurance growth to mere premium figures and policy numbers, highlighted a joint study.
“By including insurance parameter within a measure, it is possible to get a more holistic view of the extent of financial under-penetration,” highlighted the study ‘Changing Landscape of Insurance in India,’ conducted by The Associated Chambers of Commerce and Industry of India (Assocham) jointly with research firm Crisil.
Such an index could also be used by relevant industry players and policymakers to move towards financial inclusion and reach out to potential markets, the study pointed out.
At 3.9 per cent (2013-14), insurance penetration in India paints a grim picture against the world average of 6.3 per cent largely due to limited financial awareness and literacy among masses.
Besides, India is also far behind advanced economies on insurance density, which is measured as a ratio of premium to total population unlike insurance penetration, which is a ratio of premium to gross domestic product (GDP), it said.
Highlighting the various potential characteristics of an insurance index, the study observed that penetration of various kinds of insurance like micro-insurance, livelihood insurance and others should be considered to ensure inclusive growth.
Besides, there is also need for a gender-based view as it is also important to know the number of female policy holders to gauge whether insurance and financial services are accessible to both sexes equally.
It also said that extent of postal insurance penetration can give an overall view of the scope of insurance in the country as it is an expansive channel of distribution with a wide reach across India.
“There is a considerable amount of misinformation about insurance in the mind of an average Indian investor, so there is clearly a need to change people’s perceptions and outlook on insurance,” noted the study.
Distribution is the key to enhancing insurance penetration in India as distributors play a pivotal role in educating and advising clients on the need and suitability of investment products, it added.
