In India, insurance is a risk management factor. This is used to manage the uncertainties of a family after a demise, injury or destruction. Insurance provides financial security to an individual after facing major risks in property, health, life and legal liability. The requirement for an insurance is a dynamic factor for every citizen of the country. The government has taken a lot of steps to ensure its highly growing population. Increase in insurance is directly proportional to the growth of the country. This is because people tend to take more risks towards growth and development when they are adequately insured. Eventually, they make way for economic development.
A brief history of Indian insurance
The first introduction of insurance in India happened in the 19th century. This was regulated to meet the losses of businesses in those days. The Indian insurance industry was primarily under the control of the Life Insurance Corporation (LIC). To make it feasible to the lower sections of the society, the industry was nationalized in 1950. This aimed at increasing the insurance penetration in India which in turn is a cause for the growth of GDP.
Need Analysis: The nationalization, however, did not lead to expected results. Most of the population (almost 75%) then too remained uninsured. In 1999, the concentration of public sector was shifted to the private sector. Insurance Regulatory and Development Authority (IRDA) Act in 1999 led to the emergence of private insurance companies. Today there are 24 private insurance companies certified by IRDA along with LIC. This has increased Insurance density to provide positive development in the country.
Insurance buying behavior in India
Risk Analysis: In India, there are three major types of insurances:
⦁ Life Insurance
⦁ Health insurance
⦁ General insurance
Insurance generally is considered as a mode of savings or investment. People also buy insurance to escape from the paying of taxes. There are several insurance policies that are given for the benefit of people. They can choose the most suitable policy to protect their families. However, insurance is more like a compulsion by insurance agents. People don’t analyse if the policy would be suitable for them. It is more seen as a means of saving than a risk management tool. The savings made in insurance alone is 19.5% in India. In recent years, the savings via insurance policies has decreased due to increase in share of currency, mutual, provident and pension funds. There should be more savings done along with insurance as our country is exposed to a lot of uncertainties than in developed countries.
Protection Analysis: Although it is important to take insurance policies for a life coverage, it is evident that the end benefit is not very sufficient for an average family. Still, an insurance plays a vital role in stabilizing families to a certain extent. The awareness towards having insurance is reaching the less privileged people nowadays. They get insurances with lower premium rates.
The major factor for people to skip having an insurance is the level of income. Other factors leading to this are:
⦁ Increased costs of living
⦁ Higher rates of interest
⦁ Growing rate of population
In India, insurance is, thus, a tax saving tool that faces a great deal of competition with saving options available. This is also a great tool for hiking the GDP of our country. This summarizes the insurance buying behavior in our country.