Decoding Insurance

Insurance is no Rocket Science. Its, in fact, quite simple if well explained. That is my challenge in this Post Series. Please see bottom for Topic wise Links

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Ignorance is bliss; they say. But ignoring insurance is no bliss. It is a false feeling of satisfaction that, ‘nothing can happen to me’. We are all ‘Superman’ in our own world, but when our world collides with the real world reality dawns upon us. By then it is usually too late. For dummies: Insurance is like a pool created by small subscriptions from many people anticipating a loss, for compensating a few who actually suffer a loss. The subscriptions are the insurance premium, pool being maintained by the insurance company and loss can range from life, health, car, home, etc. It is actually a risk transfer mechanism.

Spread of insurance in a country is judged internationally by 2 indicators: Insurance Penetration (ratio of premium to GDP of the country) and Insurance Density (ratio of premium to population of the country). Higher the better!

According to ‘The Economic Survey 2017-18’ (http://mofapp.nic.in:8080/economicsurvey/), Ministry of Finance, GOI, India’s life insurance penetration was 2.72% and general insurance penetration was 0.77%; this compares to a global insurance penetration of 3.47% for life and 2.81%. Life Insurance density was $46.5 and general insurance density of $13.2, against global average insurance density of $353 for life and $285.3 for non-life. Clearly insurance in India stands nowhere near advanced countries, it also stands below many third world developing nations (including China).

Heavy jargons and data apart, insurance awareness in India is in a poor state. Majority of Indian population has heard of the term insurance either from an LIC agent (thanks to their dominance in market and huge agency force) or while buying a vehicle from a dealer (thanks to statutory third party insurance). Recently Health Insurance has caught the fancy of the salaried class, as it was made popular by HR initiative of most corporates.

There is a phrase popularized by an automobile major which correctly defines our mentality towards insurance, ‘Kinta Deti Hai?’! Something with uncertain or no return is considered a strict No-No to us Indians. Unfortunately insurance falls within the list of such items. That is why Endowment Insurance is considered more lucrative than Term Insurance and bank FDs better than saving for Health Insurance. Because both Term Insurance and Health Insurance pays only when loss occurs. Most of us consider motor insurance a liability imposed on us by statute. That is why Third Party Motor Insurance sells more that Own Damage Insurance. Which practically means, we are more concerned about meeting legal liabilities to third parties than meet their own expenses to repair a vehicle! We invest our lifetime savings to buy our dream home, but forget to spend a comparatively minuscule amount of time and money to insure it against uncertainty.

When I joined the industry I was like any average Indian as depicted above. With this series of blogs, I will try to use my little professional knowledge to bring insurance closer to all, in as simple and lucid language as my vocabulary permits. Request you all to follow these posts and share whenever felt necessary, as it may be helpful to someone. Comments are welcome…
Links to subsequent posts in the series:

  1. Health Insurance – Decoding Insurance
  2. Critical Illness Insurance – Decoding Insurance
  3. Top Up Health Insurance – Decoding Insurance
  4. Personal Accident Insurance – Decoding Insurance
  5. Loan Insurance – Decoding Insurance
  6. Home Loan Insurance – Decoding Insurance
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