Page 150 - India Insurance Report 2023- BIMTECH

138 India Insurance Report - Series II

Insurance, which is frequently perceived as a nonessential financial product, is often purchased by
Indian consumers without a thorough understanding of its benefits. The regulatory authority has
attempted to address the issue of mis-selling, but their actions have been ineffective and delayed in
effectively curbing misleading insurance selling practices. A significant portion of the Indian population
lacks awareness of insurance benefits and distrusts insurance providers. To achieve widespread adoption,
it is important to raise awareness about insurance and establish trust by highlighting the industry’s
credibility and track record. The primary purpose of insurance is to offer financial protection against
unexpected risks for individuals, businesses, and communities. Trust plays a critical role as policyholders
rely on insurers to fulfil their obligations during times of need. Insurance is typically a long-term
commitment, with policyholders depending on insurers for support throughout the policy duration.
Trust is vital for fostering strong relationships between insurers and policyholders, as it encourages
loyalty and continuity of coverage, thereby promoting stability and sustainability in the sector.

Although the Indian insurance sector has a long-standing history of two centuries, it transitioned
into a regulated phase just two decades ago with the establishment of the IRDAI as the governing body.
Despite continuous efforts to cultivate the market, progress has been relatively slow. Presently, insurance
penetration in India stands at a low rate of 4.2%, indicating that a significant portion of the population
remains vulnerable to financial risks. Additionally, consumer rights and protection have not been
adequately upheld, leading to instances of mis-selling and disputes over claim settlements.

Several efforts have been undertaken to tackle the pressing need for enhancing insurance penetration
and protecting consumer rights. However, substantial progress can only be achieved through a
collaborative approach involving industry stakeholders, regulators, and policymakers, built on trust and
shared comprehension. This involves increasing awareness, fortifying distribution channels, and
establishing robust regulatory frameworks that foster equitable practices and transparency. Attaining
this collective vision demands alignment and a common goal. Nevertheless, a significant challenge arises
from the potential resistance of major industry players to maintain the existing state of affairs.

The growth of the insurance sector faces two significant obstacles: a lack of awareness regarding
insurance benefits and a pervasive lack of trust. Consumer perceptions are influenced by concerns
surrounding claims settlements, limited knowledge of available products, unsatisfactory customer
experiences, and more. Modern customers seek improved services, seamless purchasing experiences,
efficient claim settlement processes, a wide range of choices, transparency, value for money, product
reviews, and exceptional customer service, even when purchasing basic products through digital channels.
Trust is closely linked to transparency and ethical practices. Insurance companies need to demonstrate
transparency in their operations, including policy terms, pricing, claims settlement procedures, and
customer data handling. Upholding ethical behaviour, adhering to regulations, and treating customers
fairly are essential for building trust and ensuring the long-term success of the insurance sector. However,
not all policyholders possess the necessary financial literacy or have the luxury of time and patience to
navigate complex grievance redressal processes. Given this, a more favourable outcome can be envisioned
if the regulatory framework places the burden of proof on the insurance companies it oversees rather
than expecting individual consumers to fight for their rights.
To bridge the divide between insurance providers and consumers, it is essential to prioritise simplified
communication. The insurance industry has long struggled with complex policies filled with technical