Context- The Standing Committee on Finance of the Lok Sabha has put forward its recommendations to boost the insurance sector in the country.
About Insurance Sector in India
- In the life insurance business, India is ranked ninth in the world in 2021. In the non-life insurance business, India is ranked 14th in the world.
- The insurance industry of India has 57 insurance companies – 24 are inside the life insurance business, while 34 are non-life insurers.
- Among the life insurers, Life Insurance Corporation (LIC) is the only public sector company.
- In addition to those, there’s a sole national re-insurer, namely General Insurance Corporation of India (GIC Re).
- Foreign Direct Investment (FDI) in the industry under the automated method is permitted as much as 26% and licensing of the industry is monitored via the insurance regulator the Insurance Regulatory and Development Authority of India (IRDAI).
Issues in Insurance Sector of India
- Low Penetration and Awareness: Insurance penetration and awareness levels in India stay particularly low, specifically in rural and semi-urban areas.
- Underinsurance and Underserved Markets: Despite the developing economy, a big portion of the population remains underinsured or uninsured, specifically in sectors inclusive of agriculture and the informal economy.
- Trust Deficit: There is often a lack of trust among consumers towards insurance companies, stemming from concerns about claim settlement processes, transparency, and the complexity of insurance products.
- Fraud and Mis-selling: Instances of insurance fraud and mis-promoting were suggested inside the industry, leading to economic losses for clients and reputational harm for insurers.
- Regulatory Challenges: While policies are important for making sure consumer safety and market stability, regulatory necessities within the insurance zone can now and again be perceived as complicated and restrictive.
- Balancing customer interests with industry growth and innovation stays a venture for regulators.
- Cybersecurity Risks: With the increasing digitalization of insurance operations and the developing risk of cyberattacks, insurers face demanding situations in safeguarding sensitive customer information and making sure of the security of on-line transactions.
- Product Standardization: The huge kind of insurance products to be had in the market, coupled with complex terms and conditions, can confuse clients and preclude knowledgeable choice-making.
- Claims Settlement Delays: Delayed or disputed claims agreement is a not unusual difficulty confronted with the aid of policyholders in India.
Recommendations by the Standing Committee
- Composite Licensing: Insurance businesses have to be allowed composite licensing that will enable an insurer to provide both life and non-life insurance merchandise, inclusive of health, vehicle and term policies.
- A composite license can cut costs and compliance hassles for insurers, as they can run one-of-a-kind insurance lines below one roof.
- Reduction in GST Rates: The committee has additionally proposed a discount in GST rates from the current degree of 18 percent within the case of health insurance and time period guidelines.
- The excessive price of GST affects a high premium burden, which acts as a deterrent to getting insurance policies.
- Catastrophe Insurance: The government should discover alternatives as to how homes and properties, mainly the ones of economically vulnerable companies, may be insured in regions prone to catastrophic damages with the aid of the Central/State Government.
- This may also require a specialized insurance business to be installed with the aid of one of the PSU general insurance companies with backed rates for catastrophe-inclined areas.
- Vehicle Insurance: Apart from taking other measures to enforce compliance of motor motors, they should observe the implementation of Challan enforcement throughout states by leveraging statistics integration with the aid of IIB, mPrivahan, and National Informatics Centre statistics.
- The committee said that a big variety of cars (in particular business automobiles) are plying on the roads without any insurance cover, which poses a hazard to the proprietors and third parties in case of accidents or damages.
- An inter-ministerial working group with participation from IRDAI, National Health Authority, different involved agencies, consumers, healthcare providers and fitness insurers ought to be set up.
- It will expand a protracted-term plan so one can cowl all sections of society with tailor-made government and private sector health insurance solutions.
Source: Indian Express
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