Page 146 - India Insurance Report 2023- BIMTECH

134 India Insurance Report - Series II

In addition to the natural catastrophe protection gap mentioned earlier, despite strong growth in health
insurance premiums over the past decade, India’s health protection gap was very high, 71 per cent, against the
global average of 38 per cent in 2021. WHO estimated that public and private health spending in India was
three per cent of GDP in 2019, well below the global average of 9.8 per cent. The lack of robust health
infrastructure in the country results in high out-of-pocket spending (close to 50 per cent on average and as high
as 71 per cent in some states) and makes people vulnerable to healthcare crises, as we saw during the pandemic. 5

Affordable and accessible re/insurance solutions can help bridge protection gaps and make countries
and economies resilient to man-made and natural disasters. Indeed, insurance for life and health, key
economic activities such as agriculture, facilities such as water supply, and recovery from disasters and
disruptions can help reduce societal vulnerabilities.

Re/insurers like Swiss Re can also help mitigate climate risk by supporting the transition to a low-
carbon economy- this can be done by de-risking transition projects and infrastructure, scaling-up related
investments and decarbonising operations.

2. Transforming India’s Insurance Landscape With the Entry of Private Players

and Progressive Interventions by the Government and the Regulator

Today, the re/insurance industry is shaped by customer experience, cost of distribution, and product
innovation, guided by the tenets of transparency, accountability, and customer centricity. The
transformation of the sector is witnessing the introduction of, and growing acceptance of, digital insurance
products that improve accessibility and cost-efficiency and elevate customer experience. However, there
are other factors that are driving re/insurance penetration. These include greater ease of doing business,
a growing realisation of the need for financial security, rising demand from young, digital-first consumers
for life and non-life insurance, attractive government policies and schemes, and supportive regulations
by the Insurance Regulatory and Development Authority of India (IRDAI).

Recently, IRDAI announced its mission, “Insurance for all by 2047”, with the aim of increasing insurance
penetration in the country and closing the protection gap. As part of this, IRDAI is effecting several regulatory
reforms to increase ease of doing business, such as allowing insurers to use video-based KYC, moving to
principle-based regulation, creating standardised insurance products, fast-track approvals for investment
proposals, extending use & File procedure to health and general plans, and so on. Recently, IRDAI also
proposed that insurance companies could adopt villages and provide 100 per cent insurance to their inhabitants. 6

Furthermore, a series of regulations are being introduced to increase capital inflow into the sector,
improve valuation, and facilitate the entry of small, specialised, and niche players. The regulator is
pushing for reforms to develop India as a re/insurance hub and is planning to introduce risk-based
capital requirements. The regulator has also suggested amendments to the existing regulatory sandbox
to catalyse further innovation in the sector.

5 Economic Survey 2022-23 | Out-of-pocket health spending still high, despite hike in government
expenditure - The Hindu
6 https://www.passionateinmarketing.com/india-needs-to-close-the-insurance-protection-gap/