National Insurance Awareness Day is celebrated on June 28 every year in India to make people aware of the benefits of investing in an insurance plan. The day also serves as a reminder to people to check if all their insurance payments (or renewals) are up to date. While insurance companies run advertisement campaigns on the National Insurance Awareness Day, the origin of this day remains a mystery.
Importance of insurance
Insurance is an assurance against uncertainty. It reduces the effect of loss caused by certain kinds of risk. Buying insurance early in life is advisable as it becomes a more expensive proposition as one grows older.
According to Mahesh Balasubramanian, Managing Director, Kotak Mahindra Life Insurance Company, insurance is necessary for financial inclusion and is essential for protection and progress.
"As our country's per capita income increases and aspirations rise, it's essential we recognise insurance's role as Plan B – a safety net that empowers us to move forward with confidence. The first step towards financial stability is securing life and health, and the rest follows," he said.
Seconding his views, Tarun Chugh, MD and CEO at Bajaj Allianz Life Insurance, said the industry is continuously innovating and the regulator is also enabling a more empowering environment for the customers as well as the industry.
"In this encouraging environment, as the industry continues to become more dynamic, products are becoming simpler, transparent and tailored to fulfil a variety of long-term financial goals. Customers today are undeniably more prudent and better informed with ease of access to relevant information. They must continue to ask all the pertinent questions while buying insurance, align the purchase to their financial goal and profile, and most essentially stay invested to fulfil their goals," he said.
Insurance penetration and recent moves
The Indian insurance sector is at the cusp of change like never before. With a slew of extensive reforms coupled with digital transformation, Mayank Gupta, Co-Founder & COO at Zopper, said the sector is striving towards building a financially resilient nation.
"The insurance sector is undergoing a tech-driven transformation that has the potential to have a huge positive impact on both policyholders and insurers," he said.
Notably, the Insurance Regulatory and Development Authority of India (IRDAI) has recently made a number of announcements aimed at further driving insurance penetration, enhancing customer centricity and leveraging the growing digitisation of the industry.
Here's a look at recent IRDAI moves aimed at increasing insurance penetration:
Firms can launch group ULIPs, combi plans without regulator's approval
IRDAI has expanded the scope of the current 'use and file' procedure, while allowing insurance companies to launch unit linked insurance plans (ULIPs) and combi plans (combination of life and health insurance plans) without seeking prior approval from the regulator. The recent changes aim to facilitate the insurance industry in promoting insurance penetration.
Composite licence for insurers
The regulator has proposed several amendments aimed at opening up the sector, driving penetration and enabling greater customer convenience. One of the proposed amendments is a composite licence for insurers, which would allow a life insurance company to sell non-life products and vice versa.
The amendment would allow cross-entry of life, general and standalone health insurance companies into each other's respective business categories — which means life insurance companies would be permitted to enter general insurance business or a sub-segment of general insurance business like health insurance and vice versa.
Distribution of other financial products
The government has proposed that insurance companies should be permitted to distribute other financial products such as mutual funds, loans, credit cards, and bank deposits. This would enable insurance companies to diversify their financial offerings to their existing customer base.
Dematerialisation of insurance policies
The regulator urged insurance companies to open e-insurance accounts (eIAs) for their customers, which would act as the first step towards dematerialisation of insurance policies. IRDAI has asked firms to dematerialise existing/old policies by December 2023.
Dematerialisation means converting a physical policy document into a modifiable online object. It means that a person will no longer need to indulge in paperwork at the time of renewing the policy. It is aimed at reducing transaction costs and also ensuring swift modifications in policies.
Setting up of Bima Sugam
IRDAI is likely to launch Bima Sugam, a one-stop insurance platform where all life and general insurance policies will be listed by August 1. According to experts, this could prove to be the biggest reform in the insurance sector in the days to come.
Bima Sugam will be responsible for sales, servicing and claims from the insurance policies. Aggregators like PolicyBazaar, brokers, banks and insurance agents will act as facilitators or bridges in terms of selling insurance policies through Bima Sugam to individuals.
Establishing Bima vahaks
The regulator recently issued draft guidelines for the establishment of ‘bima vahaks.’ These guidelines aim to establish a dedicated distribution channel in every gram panchayat (village administrative unit) to improve insurance coverage and promote awareness among the population.
Launch of state insurance plan
To bring India’s insurance penetration and density on par with global standards, IRDAI has set a goal of 100 percent insurance by the 100th year of India’s Independence.
To achieve this, Bikash Choudhary, Chief Actuarial and Governance Officer at India First Life Insurance, said IRDAI has launched a state insurance plan to improve the penetration of insurance by involving the insurers and state governments where every insurer is a lead insurer in a particular state.
