What is the basic definition of insurance?
Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.
The definition of insurance is protection against something going wrong. When you pay premiums in exchange for a policy that pays out when you crash your car in a car accident, this is an example of an auto insurance policy.
REASONS WHY INDIANS BUY SUCH LITTLE GENERAL INSURANCE
People buy less General Insurance because they don’t know where and how to buy it from, IFL provides all the guidance and the product knowledge to meet their needs, enable the clients to buy the insurance and protect the their assets.
Especially in a country like India, where a huge majority of the population lives in rural areas. In fact, general insurance penetration in India is quite low, with rates being at only 0.7% of the GDP. This is in contrast to the global average of 2.8%.
One of the reasons for low penetration could be the common notion that general insurance claims are not often paid on time. However, the point is just a myth, since most claims are paid and the claims settlement ratio is actually quite high. Here we list some points that might be responsible.
General insurance covers many possible risks, but there are a lot of gaps in this coverage. For example, most health insurance policies only cover in-patient treatments, and even there, many dental treatments are uninsured, along with non-allopathic treatments, like homeopathy, which are popular in India. Even under rural insurance policies, certain types of cash crops are not covered. Thus, a lot of product innovation is needed in the market.
Another issue is that general insurers tend to focus on growing sales rather than writing a sustainable business. What’s more, they do so at the cost of distorting the pricing for individuals. You see, many general insurance policies like health, personal accident, etc. are sold both as group and as individual policies.
The problem is that insurers increase the price for individual policies, while reducing the price for group policies, since that drives sales. However, this is counter-productive to sustainability, since group policies are often bought by employers for their employees, and they can afford to pay a little extra, while individuals would be more price sensitive.
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