To achieve the goal of "Insurance for All by 2047", India will need to coordinate action across regulators, insurers, government, technology providers and civil society, according to a new report.
The report submitted by the Indian Institute of Management Kozhikode (IIMK) to the General and Life Insurance Councils and the Insurance Regulatory and Development Authority of India (IRDAI) says "Insurance for All by 2047" is achievable—but only if it is pursued as a national mission rather than a market afterthought.
IIMK said the path forward requires regulatory clarity, technological leapfrogging, capital deepening and the building of institutional trust.
Universal access
The IIMK team that prepared the report noted that while India is the world’s fourth-largest economy, insurance penetration remains modest at about 3.7%, with significant gaps in health, property, catastrophe and small-ticket non-life coverage.
"Insurance for All" should be interpreted as universal access to affordable, appropriate risk protection, irrespective of income, geography or social status. IRDAI should adopt phasing in of a target for a 1+1 coverage—at least one term life policy and one health insurance policy—covering over 60% of the population by 2030 and 80% by 2040.
The report examined two primary questions: how insurance services can be extended to all sections of society in India and how the insurance industry can adapt to the ongoing process of creative destruction.
The report said that with timely reforms, rapid technological adoption and sustained efforts to build institutional trust, the sector has the potential to play a transformative role in safeguarding households, enterprises and the broader economy against emerging risks in the decades ahead.
The report has also suggested that the forthcoming Union Budget provide for either the divestment of state ownership or the recapitalisation of the three public sector general insurance companies, which are running negative insolvency ratios.
LIC
The report recommends a case for the splitting, divesting or unbundling of the state-controlled LIC of India. The government can engage professional merchant banker advisory services to work out the best way for splitting and unbundling the giant life insurer's activities to generate efficient and value-creating competitive units. This alone will spur enhanced interest and attract fresh investments in the sector.