‘The middle class population of 70 crore is the “missing middle” in the insurance sector’


The Covid-19 pandemic has turned the spotlight on the health insurance market in India. Subhash C Khuntia, chairman of the insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI), spoke to Swati Rathor about the industry:

 

How will Covid reshape the insurance sector in India?

Work from home (WFH) has increased significantly and this change will also impact the insurance sector in terms of greater use of digital technology in solicitation, on-boarding of customers, policy servicing, claims settlement and grievance redressal. While this may improve efficiency and reduce cost, there would be concern on data safety, security and confidentiality. Building robust systems that can prevent cyberattacks will be crucial. There will therefore be a need for more cyber insurance.

Secondly, the pandemic has resulted in economic slowdown globally. Insurance is one of the ways to provide financial protection, and hence the role of insurance as a counter-cyclical measure has become crucial. Thirdly, the incidence of natural catastrophes and pandemics has become more pronounced, and the insurance sector needs to position itself to manage such eventualities by providing needed protection.

How can the insurance sector improve health insurance penetration?

Out of pocket expenditure on health in India is as high as 64%, whereas in developed countries, this figure is less than 20%. At present, health insurance is as low as 0.29% of GDP. Ayushman Bharat has provided health insurance to the households below the poverty line. But, the middle class remains largely uncovered. Design of simple and need-based products, using simple wording to describe terms and conditions, and quick claim settlement are the key areas for the insurers to concentrate on.

To cater to the current requirement, IRDAI came out with two standard corona products, Corona Kavach and Corona Rakshak. Along with other corona specific products, the insurers have been able to cover more than 120 lakh lives against Covid-19 till end of October 2020. IRDAI has also mandated a simple, inclusive standard comprehensive health insurance product called “Arogya Sanjeevani” to be sold by all general and health insurers. This will help customers to opt for appropriate health insurance without getting confused on varying terms and conditions. We are also encouraging insurers to offer stand-alone products against vector-borne diseases like dengue, chikungunya, malaria and encephalitis.

The insurance sector has been catering primarily to the rich or the ones at the bottom of the pyramid. How can it tap the middle class?

Awareness and affordability are two important areas which the industry should work upon to take insurance closer to the middle class. The middle class covering a vast population of 70 crore is described as the “missing middle” in the insurance sector. One way is to extend government schemes to the middle class with higher coverage, but without subsidy. Another way is to have standardised products to reduce confusion in choosing appropriate policies.

There is a need to demystify product offerings further to encourage people to buy insurance. What steps can be taken in this area?

IRDAI has been emphasising on the need of offering simple products and using simple language in the policy documents. In addition, the insurers are also required to issue “Key Feature Document” to policyholders highlighting the basic and essential features in simple non-legalistic language. This effort is augmented by the mandate of the authority to offer some commonly needed products in standard form. To start with, “Arogya Sanjeevani” for health insurance, “Corona Kavach” for Covid-19 and “Saral Jeevan Bima” for pure term life insurance have been designed and rolled out. These will be followed by some more simple and standard products in other lines of business, in order to make the choice of the customers easier without being confused by a plethora of similar, but slightly varying products.

At a time when life expectancy has been increasing, how can insurance players cater to the elderly?

There are health and life insurance products specifically catering to the needs of senior citizens. For both these segments, my advice to the youngsters would be to start the policies at a young age, so that the premiums remain affordable and uninterrupted coverage is available at an advanced age.

How will emerging technologies such as AI/ML, virtual reality and IoT impact the insurance sector?

Insurers are likely to use technologies like AI, ML, IoT, Chatbots, drones, big data, predictive analytics, telematics and blockchain, to improve service delivery at all stages starting from solicitation to claim settlement and grievance redressal. The customer experience is bound to improve dramatically with use of these technologies combined with easy-to-use platforms like mobile phones. With usage of telematics devices, Usage Based Insurance (UBI) like pay-as-you drive will be more popular in the coming days. Similarly, use of drones, and satellite data analysis using AI can help farmers to get better benefit from crop insurance. IRDAI’s Regulatory Sandbox Regulations have enabled insurers to explore such innovations in a big way.

DISCLAIMER : Views expressed above are the author’s own.

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