A product that promises to cut certain uncertainties in this risky life, and does deliver on that promise. A product that has been around for hundreds of years.

A product that is associated with the most prominent of business houses around the world. And yet, prospective buyers avoid both the product and those who sell it.

The disdain for insurance in the Indian market is legendary. Even with the spectacular growth of the industry in the last two-and-a-half decades of reforms, insurance penetration is nowhere near optimum.

Pale shadow

It is a pale shadow of the growth in, say, mobile phone connections or Internet usage.

There are many reasons for it. In the distant past, sentiment and fear that insurance brought bad luck – namely death.

Added to it was the failure of many insurance companies in the first half of the 20th century which was one of the purported reasons for nationalisation of the business.

Affordability, low appeal

Later on, it was affordability and the low appeal of a financial product which suffers from a ‘no return on investment’ perception (think of motor insurance in a no-claim year). Added to it was the non-marketing/customer orientation of the nationalised insurance sector.

During the era of liberalisation, there has been no dearth of marketing thanks to technology, private investment in search of returns and competition.

Sales rose handsomely, but in pockets. Fire insurance for home and even business premises, where it is not mandated, for example, sell in meagre volumes.

Health cover surge

Health insurance growth has zoomed due to customer demand and motor insurance due to the sheer growth in vehicle population and since part of it is statutory. Commercial health insurance coverage is still dismal and estimates of uninsured vehicles on Indian roads are alarming.

Life insurance growth has been a lot better, but not to potential.

One can ascribe this to presenting products as a confused mix of protection and investment, subverting the ideal image of insurance. When the investments are market led — as in the case of unit-linked insurance policies — a bear market does damage to the very idea of insurance. Annuities are yet to catch the fancy of the public because its significant risk protection is not well-articulated.

More on reasons in the next instalment of Cover Note and, hopefully, some inferences and lessons.

(The writer is a business journalist specialising in insurance & corporate history)

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