Why Most Indians Do Not Purchase Health Insurance: A Comprehensive Analysis

India's population gaps in health insurance coverage remain stubbornly high, with nearly 30-42 crore people living without any form of health coverage. The National Institution for Transforming India (NITI Aayog) has flagged the need for a low-cost health insurance product to bridge this gap, especially if India aspires to realize its goal of a “sliver service” for its citizens.

Indifference Towards Basic Human Safety Nets

The reluctance to purchase insurance, particularly health insurance, in India is shocking. It is almost as if cars are insured annually, yet human lives are not accorded the same level of value. This mindset is deeply concerning and underscores the wider issue of insurance awareness and accessibility in the country.

Types of Insurance and Awareness Levels

In India, there are broadly two types of insurance: Life Insurance and Non-Life Insurance.

Life Insurance

Compared to Non-Life Insurance, Life Insurance has been more widely embraced in India. This awareness is driven by several key factors:

Guaranteed Return: Life Insurance policies offer a guaranteed return either through a claim or at maturity, making them more attractive to investors and policyholders. Longer Policy Period: Unlike Non-Life Insurance, which is typically an annual contract, Life Insurance policies can run for much longer durations, often decades. Employee Welfare: Employers often arrange life insurance as part of employee welfare programs, which has a positive impact on insurance awareness. Sales Agent Incentives: Agents and brokers receive commissions for life insurance policies, encouraging them to actively market such products.

Non-Life Insurance

Non-Life Insurance, however, is much less widely embraced, especially among the lower-income and less educated segments of the population. Despite its availability across a spectrum of risks (from honeybees to space shuttles), many people fail to see the value in insurance due to a lack of understanding.

Mandated Insurance

However, a few key areas drive higher rates of insurance purchase:

Vehicles: In India, vehicle insurance is required by law, which explains why the majority of the population are insured for their vehicles. Bank Assets: Banks often insure loans, ensuring that the collateral is protected. Professional and Industrial Insurances: Many businesses and professionals are required by law to have insurance for their properties and duties.

Addressing the Insurance Gap

To bridge the significant gap in health insurance coverage, a low-cost and accessible product is essential. One potential solution could be a government initiative that provides affordable health insurance schemes for the underprivileged. Additionally, raising awareness about the importance of health insurance and its long-term benefits can help change mindsets. Education and financial literacy programs can also play a crucial role in increasing insurance awareness.

Going forward, the insurance industry needs to tailor its products and marketing strategies to cater to those who are currently left out. By focusing on affordability and ease of access, the industry can work towards ensuring a more comprehensive and equitable health insurance ecosystem in India.

Conclusion

While the current awareness and uptake of insurance, especially health insurance, remains low in India, concerted efforts from both the government and the private sector can help improve this scenario. By addressing the root causes of the coverage gap and providing tailored, affordable solutions, India can move towards a future where all its citizens have access to appropriate insurance coverage.