India's Insurance Penetration Below 5%: Perception, Not Price, Is The Hurdle, Say Experts

News18

6 hours ago

Not only does insurance penetration remain abysmally low in India, but also density too. India's insurance density—which reflects the average insurance premium paid per person—stood at USD 95 in 2023-24. In comparison, the global average insurance density was significantly higher at USD 889, with USD 361 from life insurance and USD 528 from non-life insurance
Despite rapid digitisation and regulatory push, the overall penetration remains very low. On this National Insurance Awareness Day, experts from across the insurance ecosystem point to deeper roadblocks beyond just low awareness—ranging from affordability and access to trust deficits and product complexity.
While the cost of insurance is often cited as a deterrent, industry leaders argue that the bigger challenge lies in how insurance is perceived.
Many Indians continue to view insurance not as a risk buffer but as an investment or a tax-saving tool. 'Affordability is more of a perception issue than an actual financial hurdle," said Udayan Joshi, Chief Operating Officer at SBI General Insurance. 'The real need is for protection-oriented products at reasonable price points that people can relate to and see value in."
Healthcare inflation further complicates this picture, argued Amitabh Jain, Chief Operating Officer of Star Health and Allied Insurance. Even though, he added, some health plans cost as little as Rs 13 a day, rising hospitalisation costs and fraud-related premiums add to the affordability anxiety. The average consumer remains unsure about the utility of buying insurance unless faced with a crisis.
The Complexity Conundrum
Even when consumers are ready to buy, they often find insurance policies hard to navigate. 'Lengthy policy documents, jargon, and technical terms deter many, especially in rural and semi-urban India," pointed out an insurance industry veteran.
Saurabh VijayVergia, Founder and CEO of insurtech platform CoverSure added that insurance is still being 'sold as a one-time product", with minimal post-sale engagement. As a result, trust remains elusive. 'We need to move from policy selling to supporting people throughout their insurance journey—transparently and consistently."
Can Micro Products Solve Macro Problems?
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Sachet insurance and pay-as-you-use (PAYU) models have been seen as innovative ways to extend coverage to low-income and rural users. When done well, they are simple, affordable, and easily distributed through mobile wallets or mobility platforms.
However, not everyone is convinced of their long-term value. Critics argue that these micro-covers sometimes offer the illusion of protection without truly addressing risk. 'Unless we shift the focus from affordability to adequacy, sachet insurance may remain a tick-box exercise, not a real safety net," noted VijayVergia.
Still, when designed right and bundled with local services like agri-inputs or daily commute platforms, sachet insurance has the potential to bring first-time users into the fold.
Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), believes sachet insurance and usage-based models are promising—especially for Bharat (rural and low-income India).
'When bundled with mobile wallets or agri-tech platforms, these models can reach deep into underserved populations. But they must come with robust claims support and simple communication."
Embedded Insurance: A Bridge with Conditions
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One solution gaining momentum is embedded insurance—cover that's built into consumer journeys like loan applications, e-commerce purchases, or travel bookings.
'Embedded insurance reduces decision fatigue. It meets people at the right moment, in a context they understand," noted Amitabh Jain. Travel insurance is already seeing success this way.
But the success of embedded insurance hinges on clarity and usefulness, not upselling. Bharindwal warned that many consumers still ignore embedded insurance because they don't understand what's covered or how to make a claim. 'Transparency and education are vital. Without them, embedded insurance becomes just another passive feature."
Where Do We Go From Here?
If India is to close the insurance gap meaningfully, it must focus not just on selling more policies but on building trust, simplifying products, and integrating insurance meaningfully into people's lives.