During the pandemic, the insurance sector proved out to be resilient. The insurance sector faced a downturn in the gross premium, especially the life insurance sector in 2021. It faced hindrances with lower premiums and an increase in claim amounts. But the industry still turned out to be strong.
The insurance sector in India recorded a growth of 12.78% in the non-life sector and 10% in the life insurance sector. The protection gap is the extent to which losses are not covered.
During the pandemic, the rising unemployment and job losses widened the protection gap that could affect the country’s financial stability and growth. The health insurance sector is picking up but growth is restricted to the middle class and above leaving the vulnerable section of the society uninsured. The government schemes haven’t reached out to the people to their full extent.
Insurance companies need to readdress their products and provide innovative offerings. Recently IRDAI came up with an idea of insurance companies to adopt villages and provide 100% insurance.
The protection gaps need to be examined thoroughly. The protection gaps are more prominent in life, health, and pension businesses. Each of these three needs to be studied differently to reduce economic shocks caused by the pandemic and catastrophe.
Social welfare schemes launched by the government played an important role to reach out to the needy and unprivileged part of the society. The Ayushman Bharat health insurance has helped 218 million people to get free hospitalization.
The problems remain due to the inefficient distribution channels. India needs to look after better insurance distribution and find novel distribution entities like common service centers to augment insurance penetration. Distribution in rural areas can make the insurance sector lucrative. Digitalization and low costs can swiftly track the insurance penetration.
The 90% protection gap needs to be addressed on an urgent basis. The uninsured economic losses and loss of lives need to be closed. The frequency and intensity of catastrophes are rising yet only 10% of the total losses are being covered.
Only 5% of the population has home insurance, 12% has health insurance, 300 million small businesses remain uninsured and hardly anybody has a cyber insurance cover. The rise in climatic changes has increased natural calamities and the world has become more unpredictable. There is a need to mitigate the losses that arise out of such unforeseen events to decrease the mortality rate and ensure economic stability.