1273596; Parul Bajaj F2, Q.6 why India remains under - penetrated market for insurance?

INTRODUCTION

The Indian insurance industry seems to be in a state of flux. While there has been a perceptible change in the market dynamics since liberalisation and economic reforms, a considerable amount needs to be done for future growth and development of the market in an orderly and sustained manner.

DISCUSSION

The current issues and challenges faced by the insurance industry and the steps that could be taken to ensure that the industry achieves its potential.

Notwithstanding the strong improvement in penetration and density in the last 10 years, India largely remains an under-penetrated market. The market today is primarily dependent on push, tax incentives and mandatory buying for sales. There is very little customer pull, which will come from increasing financial awareness along with increasing savings and disposable income.

The business model for insurers has been changing continuously for the past couple of years on account of regulatory changes. While the regulatory changes were aimed at customer protection and increasing transparency in pricing and operations, it gave the industry very little time to adjust, leading to a lot of uncertainty in the market environment.

IN addition to challenges in growth, pricing and profitability, life insurers are also faced with significant challenges on the distribution front

The cap on commission and expense ratios further imposes restriction on the competiveness of insurers and limits the expansion of distribution channels.

.CONCLUSION

The stakeholders will have to strive for product simplification, increasing transparency of cost and pricing, effective distribution and improving customer servicing to drive salesThe claims and fraud monitoring process also needs to be simplified, strengthened by stricter guidelines for third party administrators. Despite strong growth, the non-life segment also faces stiff challenges in distribution, pricing and claims management and these issues need to be addressed on a priority to sustain the growth.

There is a requirement today for long-term assets, benefit and health policies to serve people till the time insurance in India . The pace of reforms needs to be increased especially in the areas of pricing and reinsurance.
The claims and fraud monitoring process also needs to be simplified, strengthened by stricter guidelines for third party administrators.