INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA’S VISION 2047

Latest Context

• In order to enhance insurance penetration in India, the Insurance Regulatory and Development Authority of India (IRDAI) has allocated states and union territories to each insurer as part of its objective to achieve 'Insurance for all' by 2047.
• Additionally, IRDAI intends to introduce Bima Trinity - a collaboration between general and life insurance companies - consisting of Bima Sugam, Bima Vistar, and Bima Vaahaks, with the aim of streamlining insurance processes and making them more convenient.

What is IRDAI?

• IRDAI, established in 1999, is a regulatory authority formed with the objective of safeguarding the interests of insurance customers.
•  It operates as a statutory body under the IRDA Act of 1999 and falls under the purview of the Ministry of Finance.
• The primary responsibilities of IRDAI include regulating and promoting the development of the insurance industry while overseeing insurance-related activities. The authority's powers and functions are defined by the IRDAI Act, of 1999, and the Insurance Act, of 1938.

IRDAI Vision 2047

Objective

• The objective of achieving "Insurance for All by 2047" is to ensure that every individual is provided with suitable health, life and property insurance coverage, while also ensuring that every business is supported by appropriate insurance solutions.
•  This initiative also seeks to enhance the global appeal of the Indian insurance sector.

Pillars

• Policyholder: Individuals who hold insurance policies.

• Insurers: Companies that provide insurance coverage.
• Intermediaries: Entities involved in distributing insurance products.

Key Areas of Focus

• Ensuring appropriate matching of products with customers' needs.
• Establishing a strong mechanism for resolving grievances.
• Promoting a business-friendly environment in the insurance sector.
• Aligning regulatory frameworks with market dynamics.
• Encouraging innovation
• Enhancing competition and distribution efficiency while integrating technology and transitioning towards a principle-based regulatory regime.

Importance

• This initiative holds great significance as it enables households across the nation to access affordable insurance policies that encompass health, life, property, and accidents

• These policies offer expedited claim settlements, sometimes within hours, and additional perks such as gym or yoga memberships.

Bima Trinity

• Bima Trinity comprises three components aimed at simplifying insurance processes and enhancing customer convenience.

Bima Sugam

• It is a unified platform that integrates insurers and distributors, providing customers with a streamlined experience for policy purchases, service requests, and claims settlements. All these services can be accessed through a single user-friendly portal.

Bima Vistar

• This is a comprehensive bundled policy that covers multiple areas, including life, health, property, and accidents.

•  It offers defined benefits for each risk category, ensuring prompt claim payout without the need for surveyors. Bima Vistar guarantees a hassle-free claims process for policyholders.

Bima Vaahaks

• This component focuses on establishing a women-centric workforce operating at the Gram Sabha level.

•  The role of Bima Vaahaks is to educate and persuade women about the advantages of comprehensive insurance, particularly Bima Vistar.

•  By addressing concerns and highlighting the benefits, Bima Vaahaks empowers women and contribute to their financial security.

State of the Insurance Sector in India

• Based on the Economic Survey 2022-23, the life insurance density in India has shown significant growth, increasing from USD 11.1 in 2001 to USD 91 in 2021.

•  The global insurance premiums also witnessed a 3.4% real-term increase in 2021, with the non-life insurance sector experiencing a 2.6% growth, primarily driven by commercial lines' rate hardening in developed markets.

•  India's insurance market is predicted to become one of the fastest-growing markets globally in the next decade.

•  According to IRDAI, insurance penetration in India rose from 3.76% in 2019-20 to 4.20% in 2020-21, marking an 11.70% growth.

•  Furthermore, insurance density grew from USD 78 in 2020-21 to USD 91 in 2021-22. India currently holds the 10th position globally but is projected to climb to the 6th spot by 2032.

Challenges in the Insurance Sector

• Talent Management: The insurance industry in India faces a shortage of skilled professionals in areas such as actuarial science, underwriting, claims, and risk management.

• Attracting and retaining talented individuals is a significant challenge for the sector.

• Lower Adoption Rate: Insurance has not gained widespread acceptance in India, mainly due to a lack of awareness and trust among the population.

• Rural areas, where a significant portion of the population resides, have low life insurance coverage.

• Lack of Product Innovation: The insurance sector in India has been relatively slow in terms of product innovation, leading to a lack of differentiation in the market.

• Many insurance companies offer similar products, limiting choices for customers.

• Fraudulence: Instances of fraud, such as false claims and misrepresentation of information, are a challenge in the insurance sector.

• The increased use of digital technology has inadvertently provided more opportunities for identity theft and fraudulent claims.

• Slow Rate of Digitalization: Compared to other industries, the insurance sector in India has been slower in adopting digitalization.

• This results in inefficiencies, lack of transparency, and poor customer experiences.

• Claims Management: The claims process in India is often perceived as complicated, slow, and lacking transparency.

• This can lead to customer dissatisfaction and erode trust in the insurance industry due to inefficient processes and inadequate communication.

• Addressing these challenges will be crucial for the growth and development of the insurance sector in India.

Way Forward

• To enhance the insurance sector in India, several measures can be undertaken to leverage technology, align with customer behaviour, optimize data utilization, streamline claims management, adopt hybrid distribution models, and combat fraud.

• Priority should be given to digitalization across the entire value chain to reduce costs, enhance efficiency, and foster ecosystem development.

• This entails utilizing technology to augment employee skills and productivity through upskilling programs.

• Insurers need to adapt to dynamic shifts in customer behaviour and preferences.

•  By providing personalized products promptly and emphasizing flexibility rather than standardized offerings, insurers can better cater to customer needs and effectively manage public perception.

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