Mr. Nikhil Bharadwaj. Head Corporate Communications Bajaj Allianz General Insurance

Despite concerted efforts by the insurance industry, the Insurance Regulatory and Development Authority of India (IRDAI), and the General Insurance Council, the penetration of general insurance in India remains abysmally low. While a lack of awareness was historically cited as the primary culprit, today’s reality is far more complex. Awareness campaigns like "Bima Bemisaal" have ensured people know about insurance, but awareness alone isn’t leading to action. Why is this the case?

Let’s delve into the factors holding back Indians from embracing insurance, the misconceptions they harbour, and why insurance should no longer be viewed as an afterthought.

1. Risk Appetite and Indian Psychology

Indian society has a natural aversion to risk, coupled with an inherent optimism bias: the belief that "nothing bad will ever happen to me." This mindset often leads individuals to perceive insurance premiums as a waste of money if no claim is filed. They fail to realize that insurance is not an investment—it is a safeguard against unforeseen calamities. For anything bad, faith, belief and divine intervention is often looked at as the solution.

Do We Misunderstand Insurance?

Many Indians mistakenly equate insurance with investments and expect tangible returns. This misperception undermines the true purpose of insurance—protection against pure risk. Buying insurance isn’t about profiting; it’s about ensuring financial stability in times of crisis.

2. Is Insurance Really Complicated?

One common criticism of insurance is that policies are full of jargon, legalese, and fine print, making them hard to understand. While this may be true to an extent, let’s consider another everyday example: When we purchase a smartphone or subscribe to streaming services, do we truly read the terms and conditions or privacy policies before clicking 'I Agree'?

Despite the complexity of such agreements, we trust the system and proceed, often because we perceive the benefits outweigh the effort of understanding every detail. Insurance, however, gets treated differently—held to a higher standard of simplicity, even though its importance far surpasses that of most daily conveniences.

Understanding an insurance policy’s inclusions, exclusions, and claim processes is essential. The principle of caveat emptor (let the buyer beware) applies here—customers must take ownership of their decisions. Transparency from insurers is crucial, but so is the willingness of customers to actively seek clarity and make informed choices.

3. Do We Wait for Catastrophe to Strike?

Insurance penetration in India is just 1% for general insurance—a startling statistic. During the COVID-19 pandemic, there was a surge in health insurance queries, yet this interest didn’t translate into significant policy purchases.

Similarly, uninsured vehicles remain a pressing issue. Over 70% of two-wheelers in India lack insurance. The cost of third-party (TP) insurance for two-wheelers is less than ₹1,000, but failure to have this essential coverage can lead to financial ruin in the event of an accident. The ever-increasing threat of climate change is playing out with economic destruction caused by frequent natural catastrophes. And yet, the gap between actual loss and insured loss is more than 95%

This raises the critical question:  Should we save for a rainy day, or wait for the rain to flood us before acting?

4. The Missing Middle: Left Vulnerable

India’s "missing middle"—an estimated 40 crore individuals—find themselves in a precarious position. They earn too much to qualify for government-subsidized schemes like Ayushman Bharat but too little to afford private health insurance. Without adequate health coverage, these families are one hospitalisation away from poverty.

As per a NITI Aayog report, 60% of health expenses in India are out-of-pocket. Shockingly, 8-9% of Indian households are pushed below the poverty line each year due to medical costs. How long can we afford this?

The solution lies in comprehensive and affordable health insurance products that bridge this gap and provide security to these vulnerable segments.

5. The Cost of Ignorance: Out-of-Pocket Expenses

Insurance is not just an expense—it’s a shield. Without it, individuals face the harsh reality of bearing catastrophic losses out of their own pockets. For instance:

• The premium for a health insurance policy is far lower than the cost of a prolonged hospital stay.
• A nominal third-party insurance premium for vehicles can protect families from financial devastation in the event of an accident.

Yet, many Indians opt for alternative investments, falsely believing they can rely on savings in times of need. They overlook that no savings plan can match the financial coverage insurance offers in the face of unforeseen disasters.

6. The Blame Game

It’s easy to point fingers at insurers, accusing them of prioritising profits over policyholders. While grievances do exist, they are far fewer than perceived. According to a IRDAI reports,  the grievance ratio for the insurance industry in FY 23-24 was just 0.003%, one of the lowest among industries.

Moreover, insurers settled claims worth ₹1.72 lakh crore last year, with over ₹80,000 crore directed towards health insurance. The claim settlement ratio exceeds 80%, yet the focus often remains on the 20% of rejected claims—most of which arise due to fraud, exclusions, or non-admissibility.

Instead of blaming the industry, it is crucial for customers to:

1. Thoroughly read policy wordings before buying.
2. Seek clarity on inclusions and exclusions to avoid surprises during claim settlement.
3. Most importantly, buy insurance! (best time to buy insurance is today)

7. Changing the Narrative

To boost adoption, insurers must focus on:

• Simplifying communication: Policies must be written in plain language. This is work in progress and a lot of ground has been covered on this front.
• Proactive education: Campaigns should raise awareness and drive action. When you can have flash sales and “certain days” for insurance.
• Transparency: Clear disclosures build trust with customers.

On the flip side, customers must:

• Take an active interest in understanding their policies.
• Treat insurance as a necessity, not an option.

Way Forward: Insurance as a Safety Net

Do we wait for devastation to knock on our doors before realising the importance of insurance? Or do we proactively protect ourselves and our families against life’s uncertainties?

Insurance should be seen as the wind beneath our wings—allowing us to soar confidently, knowing that we are protected even if we encounter turbulence. It’s time for India to embrace insurance as a vital tool for financial security, not just an optional expense.

At the end of the day, let’s remember: The best insurance policy is the one you hope you’ll never need—but are glad to have if you do.