While India is a nation where life insurance is both necessary and successful, 988 million or 75% of the country’s population has no life insurance. To add to the worry, the remaining population isn’t adequately insured either. On an average, an assured Indian’s dependents would get only 8% of what is needed to deal with the financial shock.
The reason life insurance is necessary for Indians could be understood as follows. An average middle-class or lower middle class household in the country is comprised of an earning member (usually a male) and dependents (usually women and children). Upon the death of the earning member, his dependents would neither have any source of income nor any significant inheritance. The situation is even worse with lower socio-economic backgrounds.
Upon checking the income statistics, 80% of the Indian population earned less than $2 a day back in 2013. A more recent statistic confirms that 92% female, and 82% male workers throughout the country earn less than Rs 10,000 per month. Only 1% of the population earns more than Rs 50,000 per month and as few as 7.4 million people (out of 1.3 billion) fall in the highest tax bracket (i.e. earn more than Rs 500,000 per month).
In short, unless an Indian is one of those top 1%, a life insurance would be a must. This fact has already made India one of the best markets for the life insurance industry. All the country needs now is the government extending assistance for assurance to those who cannot afford it.
Information from the Insurance Regulatory and Development Authority of India or IRDAI, shows only 25% of the Indian population is insured. This percentage has been measured by counting the number of policies sold. It is probable that many of those insured might be holding 2 or more insurance policies through different companies. This might push the number of the uninsured even higher.
Other than the fact that affording life insurance might be difficult for the majority of the Indian population, people are sceptical about getting assistance upon the death of the insured member. In a country where corruption is rampant, making authorities pay due money is difficult. At times, insurance companies refuse to pay, stating reasons which are not logical. Either the regulatory authorities are bribed or the dependents who are already under financial strain are not able to sue the insurance company. For this reason, Indians have been preferring government owned entities like LIC life insurance or an SBI term insurance plan for insuring themselves.
Obviously this hasn’t been a perfect arrangement either. Officials at LIC and SBI are notorious for their slow pace of work. They are either uninterested in the work or simply await other benefits before they agree to paying the insurance amount.
Life insurance companies always knew nations with single-earner households would be a good market for them. Other than India, they have targeted countries like China, Myanmar, Indonesia, etc. Another scope has been found in Australia where the middle-class is affluent and organized. They have enough to invest and a part of the reasonable investment goes towards securing the future for their family.
Interestingly, insurance companies face fierce competition from government-owned companies in India, but they compete with each other in the more-developed countries, and that is an easier competition. All that could be read about insurance related news in the west is usually about which company could be better.
In the U.S., the government under Trump is doing away with ObamaCare and is trying to give insurance back to the companies. While it has been a huge political controversy, the situation seems to be moving towards a long-term resolution.
