According to a report by global consulting firm McKinsey, expanding insurance coverage to currently uninsured people and assets could save India approximately $10 billion annually. The report suggests that redirecting these saved funds could help the Indian government stimulate economic growth and reduce financial strain.
The McKinsey report highlights that a significant portion of India’s population and insurable assets remain uninsured, exposing them to high out-of-pocket expenses. This lack of coverage places a considerable financial burden on public funds, as many citizens face significant expenses without adequate protection.
Dual Benefits of Insurance: Financial Security and Capital Mobilization
The consultancy emphasizes that expanding insurance coverage would not only provide financial protection against emergencies but also contribute to long-term financial stability. The collected premiums could be channeled into capital for developmental projects, thereby bolstering India’s socioeconomic development.
McKinsey’s findings indicate that broader life insurance coverage could help reduce the financial burden on the government, which often needs to provide ex gratia payments to families affected by unforeseen events like accidents or natural disasters.
Sector Growth Driven by Rising Healthcare Costs and Middle-Class Expansion
The report notes that several factors, including rising healthcare costs, the expanding middle class, increased awareness following the pandemic, and favorable regulations, have driven the rapid growth and profitability of India’s insurance sector.
The Insurance Regulatory and Development Authority of India (IRDAI) has set a goal of achieving “Insurance for All” by the year 2047. However, despite this ambitious target, McKinsey’s report points out a decline in the insurance penetration rate from 4.2% in 2022 to 4.0% in 2023, suggesting that the industry’s progress has lagged behind the country’s economic growth.
To make insurance more affordable, IRDAI has introduced measures to lower premiums for policies sold through direct channels. This move is intended to reduce distribution costs and pass the savings on to policyholders, promoting greater adoption of insurance coverage across the country.
