Monday, July 23, 2018

Ways To Increase Insurance Penetration In India

When we talk of insurance in India, we talk about the insurance penetration in India, not specifically the urban or rural areas but India as a whole. The insurance penetration in India is pretty low when compared with other countries – just 3.49% (global insurance penetration rate is 6.28%). Some of the emerging economies of Asia, such as Malaysia (4.77%), Thailand (5.42%) and China (4.77%) have higher insurance penetration than India.

The rural India represents around 70% of the population of India and the Government of India has introduced a number of insurance and social security schemes for the people of the vulnerable sector. These schemes provide insurance cover at a cost of a nominal premium –

  •   Pradhan Mantri Suraksha Bima Yojana
  •  Pradhan Mantri Jeevan Jyoti Bima Yojana
  •  Pradhan Mantri Jan Dhan Yojana
  •  Aam Admi Bima Yojana
  •  National Health Protection Scheme (Ayushman Bharat Scheme) – Not out yet.

For most rural Indians, access to clean drinking water, children's marriage and shelter is higher on their list of priorities than a phenomenon called 'insurance'. Most remain unconvinced of insurance benefits. Unsurprisingly, penetration rates remain low.

Status of Insurance in Rural India

The market size in the rural areas are smaller in comparison to the urban regions. Lower population is a hindrance to the growth of insurance companies in the rural areas in India. During 2015-16, the number of lives covered under the Health Insurance policies was 36 crore, which is approx. 30% of total population of India. Every subsequent year, this number has seen an increase (around 28.80 crore people had the insurance policy in the last fiscal). The life insurance industry recorded a new premium income of over Rs. 1.87 trillion during June 2016 to May 2017 period. In April-November 2016, the life insurance industry saw a 9 % increase in overall annual premium.

The insurance sector in India saw over 10 M&A (merger and acquisition) deals in 2017 that were worth US$ 903 million. In 2017-18, enrolments under the PMSBY (Pradhan Mantri Suraksha Bima Yojana) reached 130.41 million while the National Health Protection Scheme was announced by the government under Budget 2018-19 as a part of Ayushman Bharat. The mentioned schemes are reported to provide an insurance cover of over Rs 500,000 to more than 100 million vulnerable families in the country.

According to news publisher Asian Age, the central government is not happy with the slow progress and poor feedback of the three financial inclusion schemes under the Gram Swaraj Abhiyan (GSA) of Narendra Modi government – PMJDY, PMSBY and PMJJY, which is why it has directed the state run-insurance companies and banks to station their top-level executives and make sure the targets under these schemes are achieved.

The banks and insurance companies have been directed to send their regional and zonal heads as well as banking correspondents on field visits to ensure targets are achieved.
Also, under the recent IRDAI Regulations, all insurance companies, which are transacting non-life insurance business, have been asked to underwrite business in the rural sector of at least 2% of total gross premium in the first financial year while in the second financial year, they have to underwrite business of atleast 3%. Further, they have to underwrite 5% of total gross premium in the third and the further financial years.

What can be done?

Here are some of the recommendations I have:
ü  To be successful in selling their products, an insurance company must have quality people, innovative management, be able to employ technology effectively, besides having the right products and distribution channels.
ü  A report published by the Insurance Information Bureau[1] revealed that there is a direct correlation between banking inclusion and insurance penetration. Adoption rates of digital payments in rural India indicates that the potential for disruption in the insurance industry by going digital is high.
ü  Financial literacy is one of the key drivers for penetration of insurance. The National Institute of Security’s market report on financial literacy shows a clear gap between urban and rural levels of literacy and knowledge of insurance products in specific. It means that the people living in urban areas had more knowledge about insurance products in comparison to people living in rural areas and to remove this gap, it is important to hold meetings and workshops in rural areas. Further, TV ads and newspapers can help for this purpose.
ü  People living in rural areas require trust the most. They have very limited trust in insurers but if the insurance companies get local people to work as their agents, the level of trust as well as insurance penetration can increase in rural areas.
ü  Rural and urban customers alike would appreciate total clarity[2] in enumeration of products’ benefits, and use of normal language in place of legalese for in policy wording. Hence, it is amply clear that application and claim processes need to be streamlined to achieve predictable outcomes.
ü  The use of CSCs (Common Service Center) is important for increasing sale of policies in the rural India. IT Minister Ravi Shankar Prasad said recently that the network of Common Service Centres (CSCs) will be expanded to 2.5 lakh gram panchayats by the end of this year. Here’s some information on what CSCs are doing and how successful they are – link.
ü  App like the mobile app brought by recently can also help in the growth of insurance in rural India. A white paper, released by InsuringIndia, underlined that 25% of the online insurance demand of the country comes from Tier V cities (which has less than 5 lakh population). The penetration of insurance in India is bound to increase if similar apps are introduced by the insurance companies.
ü  Video vans can be used in rural areas for publicity of insurance products and government schemes. A single video van can cover 2 /3 villages in a day to cover up to 22 to 78 villages in one route cycle of 26 operating days. These rural publicity vans can reach the target segment and has his/her undivided attention. Also, this provides an opportunity for 2 way communications. An opportunity to make the consumer understand the product and influence him positively to buy it. Further, they can be used for promotions.
ü  For several years, Nukkad Naatak has been used to bring up the adversities of the society but it can also be used to bring awareness among the rural population about insurance. It can also be used by the insurance companies to promote insurance products.
ü  I would like to add what Director General of CII, Chandrajit Banerjee, said “All stakeholders – the industry, intermediaries, government and regulator need to work together in transforming customer experience.”

At last, if you have any suggestions, please do comment! Looking forward to read your recommendations.

[1] Source: Rural Marketing – Tech Disruptions in Rural India to drive Growth in Insurance Sector
[2] CII-PWC Report, Rural Marketing blog

Nishtha Singh

PGDM [Insurance Business Management]

2017-19 Batch, BIMTECH

Monday, November 20, 2017

India: A Patient’s Bed Head Ticket!

Sad to say that the one area where our record is so patchy, uneven and unsheathing is “Health of India”. To say that progress is at a snail’s pace will almost be an exaggeration – it is much lower than that.

Here is the macro picture. India faces a huge disease burden from communicable diseases such as diarrhoea and tuberculosis, besides she bears the brunt of non-communicable diseases like heart diseases and diabetes. Worse, this health crisis is increased by a widening disparity between India’s relatively more prosperous and poorer states, which can block its demographics dividend. 

Some increase in life expectancy.  It (life expectancy and at birth) has improved from 59.7 years in 1990 to 70 year in 2016 for women. For men, life expectancy increased from 58.3 years to 66.9 years. But here again. State level inequalities are stark, with a range of 66.8 years in Uttar Pradesh to 78.7 years in Kerala for women, and 63.6 years in Assam to 73.8 years in Kerala for men in 2016.
While mortality from communicable diseases has reduced come 53.6% to 27.5 %, Deaths from NCD like heart, Obesity extra problems rose from 37.9 % to 61.8 %.

Some of the more prosperous states life Goa, Tamil Nadu and Kerala contribute the largest share of NCDs. These include diabetes, chronic respiratory disease, mental health and neurological disorders, cancers, cardiovascular diseases, chronic kidney diseases and musculoskeletal disorders.

In contrast, malnutrition continues to be a curse in some the poorer states, also called the Empowered action group (EAG) like Chhattisgarh. Bihar, Madhya Pradesh. Jharkhand, Rajasthan, Odisha, Uttarakhand, Uttar Pradesh and Assam. There is a higher incidence of malnutrition among women.

The contribution of non-communicable diseases to health loss, fuelled by unhealthy diets, high blood pressure, blood sugar and overweight, has doubled in India over the past two decades. Air pollution and tobacco smoking continue to be major contributors to health loss.

It’s better not to talk about our infant mortality, female mortality or stunting of children under age 5, where we are even behind some of our neighbouring countries life Sri Lanka and Bangladesh. Unless state governments set aside a significant portion of their budgets (like Kerala, Tamil Nadu etc.) towards health education and social services for the next one decade, we will continue to languish as a “poor health nation”. Let us hope that our politicians will get enlightenment sooner than later!


Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology

Saturday, September 23, 2017

Vanishing Opportunity

Thus the promise of demographic divined for India is fading fast. We are a country with 50% of its population below aged 26 but we rank very low on the global human capital index. This indicates that India’s not able to make use of its human resource. China, on the other hand, does a far better job in developing its human capital which has helped it to emerge as a strong economic power.

There are many worrying data points such as period children spend in school. The American kids spend 13.6 mean years in school wereas the Chinese and India children spend 7.9 and 5.8 years respectively. India’s has a smaller proportion of population working or looking for work (52.5%), while the Chinese have 70.7% and the US has 62.8%. The youth not in employment, education or training in India is a high 72.5%. Our public spending on education is only 3.8% as compared to 5.4% US.  

We have a grim job situation looming ahead of jobless growth. A sea of negative numbers is coming to light. Manufacturing, which accounts for 18% of the GDP and which directly employs 12% of the population, could have absorbed the growing number of young persons had they been trained technically. The problem of unemployment is looming day by day and is getting worse because of the India economy’s inability to generate jobs to those who entre the labour market. Even our youth literacy rate of 89% is well behind other leading emerging markets. India also has the world’s largest employment gender gap.

Even though many who are making policies are aware of these facts, we have not seen any concerted effort to retain the demographic dividend. This calls for joint action between the centre and the states. Since no one feels the felt need to do anything about it, the buck is being passed around and bandaids like the formation skilled development ministry with poor leadership are done half – heartedly. Time had come to deal with the issue on a mission mode. A joint central – state high power body of eminent and experienced people with executive powers should be set up with defined outcome target. Without concrete measures, the many advantages of being a young nation with the nodal age of 27 years would be lost forever. 


Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology

Tuesday, August 22, 2017

Artificial Intelligence is the New Electricity

AI or artificial Intelligence has evoked great interest among all sections of society, especially the academic and business world. Andrew Ng of Stanford University and currently with Baidu is one of the foremost authorities and evangelists of the concept. The following matter is derived from his recent presentations at various fora.

About a century ago, electricity truly revolutionised our living. It replaced steam power machine with electric machines, transportation was transformed, manufacturing, agriculture, healthcare etc also got transformed. Now self - driving is the new industry built on AI. The others are search engines, food delivery etc.

AI is driving tremendous economic value, easily in the billions. And this is only by one type of AI – one idea. The technical term for this is called Supervised Learning, which uses AI to figure out a relatively simple A to B mapping, or A to B response. For example, a system determining whether an email is spam or not, or determining the objects in an image. Another example would be a system that takes in an audio clip and outputs a transcript of what was said.

Today’s AI still very limited compared to human intelligence. “Anything that a typical human can do with at most 1 sec of thought, can probably now or soon be automated with AI.”
AI is certain to affect the job market, the early signs of which are now manifest.

What are major trends in AI?

The earlier generation of AI software and Machine Learning algorithms have been slowing down. However, because of Moore’s law and the utilization of GPUs, even if a Neural network is fed a small amount of data, its performance far surpasses that of traditional algorithms. Now the leading edge in Ai research is shifting to supercomputers or HPCs (High performance Computing).
The magic thing about Neural Network is that you do not need to worry about the output of intermediate layers, because it can figure them out by itself. Part of the magic is when you have enough data, it can figure out a lot of things by itself. All the smarts in a neural network comes from us giving it tons of data.

Some of the exciting opportunities of AI are in the field of speech recognition, facial recognition healthcare, radiology and education.

Ai has had several winters before, but it has passed into the phase of eternal spring!


Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology

Thursday, July 6, 2017


In today’s Business Standard, eminent commentator and analyst, Mr. A. V. Rajwade has written on the above subject drawing attention to the fact that without rapid expansion of this sector. Fast and consistent growth of Indian economy is unlikely in the near future if manufacturing does not take off.

Notwithstanding our signal success in the services sector, the greatest major current requirement is job creation. Adding to the worries is the prospect of IT industry which seems to be hazy. So, we need to explore how best we can build on our existing strengths to “grow with jobs”. In the last 70 years, no Asian economy has grown fast and consistently without expanding the its manufacturing sector. The government rightly wants to increase the contribution of the manufacturing sector to 25% of GDP by 2025, from the present stagnant level of 16%.

There are some negative developments in India’s manufacturing sector.  General Motors has recently announced closure.  Lafarge, the international cement giant, has sold its holdings in India. Carns UK is in the grip of tax disputes and may not be investing much hereafter. Nokia also left India because of tax issues.  Posco and Arcelor Mittal seem to have given up the idea of investing in Indian manufacturing. As for the big Indian manufacturers, they seem to be terribly investment shy. Project investments have declined sharply in the first quarter of 2017 – 18.

We, at present, rank 130 out of 193 countries in the World Bank’s rankings in the ease of doing business category. The recently introduced GST might help here in the long run. In the short term, as admitted by the Finance Minister, there may be disturbances in the manufacturing sector with a possible fall in output.

There is also urgent need for larger investment in infrastructure, which are highly capital intensive. They will need public funding. The progress is not very encouraging. The other problem is the decline of bank lending or bank credit going to industry. The main reason is said to be the corrective measures taken by the government with regard to nonperforming assets. Measures like the privatization of loss making public enterprises like Air India needs to be speeded up.
All in all, a total fresh look on the subject needs to be taken collectively by the centre and the states. We may just be running out of time.


Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology

Tuesday, June 6, 2017


After Donald Trump played the proverbial bull in the China shop, wrecked the Paris Climate Agreement and proclaimed that he was elected to serve the people of Pittsburgh and not Paris, all hell broke loose. Till then, US leadership was almost taken for granted in all international initiatives either through the UN or other multilateral forums. President Obama after prolonged negotiations with all countries was able to hammer out the contentious principle of countries preventing the rise in the surface temperature sea within a ceiling of 2° centigrade. Trump with his slogan of “America First” and preference for coal and fossil fuels, openly declared that global warming was a hoax and he was dumping the Paris agreement. 

This created grater uncertainties in the world financial and commodity markets. In the context of the prevailing volatility because of Brexit, the EU countries got together fast and decided to stick with the Paris agreement as well as all other international trade arrangements. In a jiffy, the Prime Minister of China, Li Keqiang, may be in his capacity as the representative of the world’s number two economy, flew into Europe and virtually took his due position at the high table of advanced countries, which was foolishly vacated by Donald Trump. Please remember that when the US was around, China was considered as the leader of the only developing countries. The two important European leaders Merkel and Macron of Germany and France jelled swiftly with Li Keqiang and a new global collective leadership seems to have emerged – all thanks to the abdication of the number one slot by Donald Trump.

In terms of its economic and financial clout – it has 10% of the world market share in exports and imports - you can say that China has for all practical purposes become the spokesperson for the globalization on the back of its One Belt One Road transcontinental project. Moreover, China also is the undisputed leader in the 10 – nation trading block of Asean. But for India’s own reluctance to play a prominent role either in the Asean or in the wider modern world and its miniscule share of 1% of the world trade, China has become the undisputed CEO of globalization.

It would be a long haul for India with active ‘Look East’ policy (which is only in name now)  to make its presence felt as a leading Asian trading nation and subsequently as a prominent world trading nation. This could call for decisive, quick international trade and commerce steps and execution on the part of India.


Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology

Friday, May 26, 2017


The banking industry in India today presents a confused picture. On the one hand, super regulator Reserve Bank of India has granted bank licenses to 23 fresh applicants such as Aditya Birla Neo more, Reliance Industries, Tech Mahindra, Vodafone Mpesa, Paytm and Airtel. These corporates have to invest Rs. 100 crore each to gain entry into the banking sector.  And on the other, legacy banks, who constitute the majority seem to be on their last leg.

Ironically, the banking companies in the public sector, who constitute more than 70% of its turnover are in dire straits. Reason: unimaginable NPA burden. This ailment is has crippled almost all of the public sector banks. It is estimated that PSU banks have run up an NPA position of Rs. 6, 11, 607 crore as on March 31, 2016. According to a Credit, Suisse estimate, there could be a default on 16-17 per cent of total bank loans by March 31, 2018. Presently, the food and non-food credit stand set Rs. 75, 20, 30 crore. This would add up to about Rs.12 lakh crore of humungous NPAs.

It is in the above context that we have to examine the recent Banking Regulation (Amendment) Ordinance of May 4, 2017, which authorizes the RBI to take decisions on the settlement of NPAs and a consequent cleaning up of bank balance sheets-part of the twin balance sheet problem raised by the government’s Chief Economic Advisor, Dr. Arvind Subramanian.

It is ironical that in the bank boardd which sanctioned such gargantuan loans to corporates like those of Malya and other defaulters, there was a full-fledged representative of the RBI present on all such occasions. Neither the government nor the RBI is talking about what action would be taken against such board members who sanctioned these unviable loans. A colossal failure of good governance.

As a matter of fact, the issue is the parlous nature of India’s corporate debt, as they rely on banks for their main source of funds. 65.7 % of the Indian corporate debt is funded by banks. Large borrowers account for 56% of bank debt and 88% of their NPAs. Of this, 40% of debt lies with companies with an interest coverage ratio of less than one. Almost over half of the debt is owned by firms whose debt equity ratio is more than 150%.

This mess is because of the sanction of loans to corporates who lacked capital as well as expertise, besides of course politically directed instructions.  If the writing off of Rs. 36, 359 crore worth agricultural loans in Uttar Pradesh was bad economics, then the waiving of corporate NPAs would be worse. It looks like that the public sector banks are on a course to self – distraction over a time period with the cycle of continuous re-capitalization and self – perpetuating defaults. This is indeed a sad outcome brought about by greed of capitalists, collusion of the bureaucracy and criminal negligence in supervision  on the part of RBI and the Ministry of Finance. It would appear that we’ve perpetuated a self-serving system of socialization of losses and privatization of gains!

Will this cycle be broken and health restored to the banking system? As of now, the light at the end of the tunnel seems to be that of the oncoming train………..


Prof. K. K. Krishnan
Chairperson - CCR &
Prof. Centre for Insurance & Risk Management
Birla Institute of Management Technology