Introduction-
Recently, several factors have combined to help the insurance sector grow in India.
These factors can be classified under four major heads which include regulatory, economic, demographic, and technological factors.
Government Controls-
1. Liberalization of the insurance sector’s scope – Private players were allowed entry in 2000 to liberalize the insurance scope. This has naturally increased competition, innovation, and a variety of products.
2. Protection of Policyholders- Protecting the interests of policyholders is the main aim, the focus being on the policy’s effective protection rather than the amount paid to the losers.
3. FDI Reforms- The Insurance business has been growing relatively quickly, and improved business environment and operational performance have occurred due to FDI limits increase in the insurance business.
Economic Factors-
1. Increase in per capita income – A successive increase in the per capita income has made more money available in the market for insurance policies leading to growing interest in insurance products, particularly life insurance and health insurance products.
2. Rising Middle Class- The middle class is a new category of consumer that is rapidly growing, is more sensitive to the need of having financial protection, and is willing to purchase insurance.
3. Urbanization- The need for property insurance and the appreciation of properties have been caused by the rising urbanization levels in India.
Demographic Factors-
1. Aging Population- The increasing population age in India has caused a rise in demand for retirement and health insurance plans.
2. Rising Life Expectancy- The increase in life expectancy has made it essential to plan long-term finances through pension and life insurance products.
Technological Factors-
1. Digitalization- Digital technologies have revolutionized the operations and strategies in the insurance industry expanding outreach to customers, improving service delivery, and lowering costs.
2. Insurtech- Technology innovation in the insurance space has happened through the entry of Insurtech companies that introduced products like telematics-based auto insurance and health insurance applications.
3. Data Analytics- Data analytics has assisted insurers in gaining insight into customer preferences, improving risk evaluation, and creating tailored solutions.
The Role of the Insurance Sector in the Development of India-
The insurance sector is important in India’s development as it enhances economic development, promotes financial stability as well as assists in social welfare.
Economic Growth-
1. Long-Term Investments- Insurance companies almost always invest a big part of their funds into long-term assets such as infrastructure projects and this in turn promotes economic growth.
2. Risk Mitigation- Through risk coverage, insurance promotes economic activity because businesses and individuals can undertake risks and make decisions that they would otherwise not be able to.
3. Financial Inclusion- Insurance loss products can also play a role in financial inclusion since they create a financial safety net for the poorer section of the population,
Financial Stability-
1. Risk Management- Insurance companies help in risk management for risks such as natural disasters, severe accidents, and illnesses, which have adverse consequences on the economy.
2. Capital Formation- Through the process of mobilizing savings and investing them in productive assets, insurance companies assist in the process of capital formation.
Social Welfare-
1. Social Security- Insurance products like life and health insurance normally help to safeguard people’s families from uncertainty.
2. Retirement Planning- Pension products enable people to save for retirement and protect themselves from financial risks during old age.Healthcare: Health insurance can help individuals to access quality healthcare, which can improve their overall health and well-being.
3. Healthcare- Health insurance may allow individuals to receive healthcare of good standards and eventually, the health and wellness of these individuals is likely to get better.
Conclusion–
The Indian insurance sector has real prospects not only for growth but to also provide the necessary support for the development of the Indian economy. By overcoming numerous hurdles such as low penetration of insurance, lack of education and knowledge, and regulatory barriers, the insurance sector can add value to the process of growth, stability, and welfare.
FAQ-.
1. What are some of the issues that affect the insurance industry in India?
Some of the issues comprise limited penetration of insurance, unavailability of basic information, regulatory difficulties, unscrupulous behaviors, and so on.
2. How is the future of the Indian insurance sector?
Prospects of working in the Indian insurance sector are bright and the future is promising with regards to health and life insurance. With increased awareness, greater disposable income as well as government promotion, the Indian insurance industry is set to thrive even more.
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