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The growth in the insurance sector is internationally measured based on the standard of insurance penetration. Insurance penetration is defined as the ratio of premium underwritten in a given year to the gross domestic product (GDP). Likewise, insurance density is another well recognised benchmark and is defined as the ratio of premium underwritten in a given year to total population (measured in US dollars for convenience of comparison). The Indian insurance business has in the past remained under-developed with low levels of insurance penetration.
At present20, insurance penetration in India is 3.3 per cent of the GDP (it was 2.71 per cent in 2001) while the insurance density is at US$55 (it was US$11.5 in 2001). Globally, insurance penetration and density were 6.1 per cent and US$ 662, respectively.
As per the area experts and the insurance regulator, there are several factors responsible for the low insurance penetration in the country—major ones of them are as given below:
(i) Complex and delayed claim settlement procedures;
(ii) Vague and incomprehensible rules and regulations of the insurance companies;
(iii) Lack of education and awareness among the masses;
(iv) Lower income levels of the population;
(v) Socio-cultural factors;
(vi) Lack of level playing field in the industry; and
(vii) Less vibrancy in the regulatory framework.
Recently enacted Insurance Laws (Amendment) Act, 2015 is supposed to have positive impact on regulatory framework as well as insurance penetration.
(i) Health Insurance: The Insurance Regulatory Development Authority (IRDA) has been taking a number of proactive steps as part of the initiatives for the spread of health insurance. It had set up a National Health Insurance Working Group in 2003, which provided a platform for the various stakeholders in the health insurance industry to work together and suggest solutions on various relevant issues in the sector. The IRDA is also co-ordinating with and supporting insurance industry initiatives in standardising certain key terminology used in health insurance documents, for better comprehension and in the interest of policyholders. The General Insurance Council, comprising all non-life insurers, evolved a consensus on a uniform definition of ‘pre-existing diseases’ and its exclusion wording, which has earlier been an expression with many definitions, still more interpretations, and certainly a whole lot of grievances. Such standardisation, effective 1 June, 2008 will help the insured by minimising ambiguity and also by better comparability of health insurance products. Also, with effect from 1 October, 2011, portability in health insurance has been started in which an insured, if not happy with services or the product of the existing insurer, can change to another insurer whilst enjoying the benefits (especially that of pre- existing diseases) of her/his existing policy.
(ii) Micro Insurance: Micro insurance regulations issued by the IRDA have provided a fillip to propagating micro insurance as a conceptual issue. With the positive and facilitative approach adopted under the micro insurance regulations, it is expected that all insurance companies would come out with a progressive business approach and carry forward the spirit of regulations thereby extending insurance penetration to all segments of the society. Presently, there are 10,482 micro–insurance agents operating in the micro–insurance sector.