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Startling facts of uninsurance and low penetration rates

Deepak Yohannan talks about the serious problems of uninsurance and low penetration rates for health and general insurance in India. He says that only 0.2 percent of the population had health insurance policies while 25 percent had general insurance cover.

June 11, 2013 / 05:09 PM IST

Insurance is a modern day blessing and quite naturally you would expect the general public to embrace this gift. However, the numbers reveal a startling fact about uninsurance and low penetration in India. Did you know that only about 0.2 percent of the total population have health insurance policies?

Yes, you read that right! Insurance is quite rightly perceived as a difficult product. A large percentage of the Indian population remains uninsured. Then, there is the problem of low penetration.

Also read: Perennial problem of underinsurance in India

While the insurance rates in the urban areas are promising, very few people living in the rural areas have their own insurance policies.

This is a problem has been addressed by the Insurance Regulatory and Development Authority (IRDA) and is underway to increase the penetration rate.

Uninsurance in India

The insurance sector is a rapidly growing. Around Rs 60,000crore was collected as insurance premium in 2012. However, number of facts show that a vast number of people in India do not have insurance.

Only about 25 percent of the people have general insurance cover. If this was dismal, you’d be shocked to know that most of the people who have insurance are either over-insured or have inadequate amounts of coverage!

In an article published last month, The Times of India reported that 35 percent cars on Indian roads run without insurance.

The article quoted G Srinivasan, chairman, New India Assurance, as saying, “Nearly 70 percent two-wheelers and 30-35 percent of four wheelers are uninsured. It is clearly a challenge to society as victims of accidents caused by these vehicles do not get adequate compensation.”

Low penetration rates

Apart from uninsurance, the other problem that plagues the sector is low penetration. Penetration of insurance is calculated as the ratio of insurance premium to the GDP.

In its paper, 'India Life Insurance 2012: Fortune Favors the Bold', McKinsey & Company stated that "In urban areas penetration of life insurance in the mass market is about 65 percent, and it is considerably less in the low-income unbanked segment."

"In rural areas, life insurance penetration in the banked segment is estimated to be about 40 percent, while it is marginal at best in the unbanked segment.”

Experts say that one of the main reasons for this is the mis-selling of insurance products. The IRDA stated that most of the grievances registered with them were regarding mis-selling of insurance policies.

There also is a need to design insurance products in a more customer-friendly manner; that would appeal to the general public.

The above mentioned facts clearly highlight the shocking state of affairs in the seemingly successful insurance sector. While the figures in urban India are promising, we cannot rely simply on them and ignore the rural sector.

There is an urgent need to revamp the insurance products in general to attract more customers. There is also a need to educate people about the need and benefits of insurance. Only then can the issues of uninsurance and low penetration be tackled.

The author is the CEO of, an online insurance price & features comparison portal.

first published: Jun 11, 2013 04:55 pm

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