Despite the recent growth of life insurance, India has one of the largest coverage gaps in the world, with insurance penetration as well as density far below the global average. So, even as the market has grown in size, an overwhelming majority of the population remains uninsured and even most of those who are insured have insufficient cover. What’s worse is that even those who have life insurance are insured of only 8% of what may be required to protect their family from a financial shock.
At least 988 million Indians - more than the population of Europe and 75% of all Indians - are not covered by any form of life insurance, and an Indian is assured of only 8% of what may be required to protect a family from financial shock following the death of an earning member, according to a report by IndiaSpend, a data-driven public interest journalism initiative. “This is much lower than the insurance coverage adequacy of 44% in Japan, 84% in Taiwan, and 67% in Australia,” the report.
India had about 328 million life insurance policies in 2017, according to data from the Handbook on Indian Insurance Statistics, 2016-17, of the Insurance Regulatory and Development Authority of India (IRDAI). Assuming each policy corresponds to a unique citizen, this accounts for 25% of the population having life insurance cover, leaving 75% - or 988 million Indians - without cover.
Apart from the lack of awareness regarding the necessity of insurance, one of the major reasons behind the inadequate coverage of the Indian population is the prevalence of insurance products which do not really offer a proper life cover. According to a 2017 report by global consultancy McKinsey& Co, the insurance market in India is dominated by products which offer both protection and investment features, such as endowment plans and Unit Linked Insurance Plans. The life cover provided by such products tends to be much lower than that offered by pure protection products.
According to experts, a higher penetration of such pure protection plans like term insurance, which requires a coordinated push from the insurance players as well as policymakers, can help the country come out of the shadow of underinsurance, and thereby, giving its citizens the freedom to take chances for a better life.
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