EconSurvey
Climate change, geopolitical uncertainty challenges for insurers
This story was originally published at 18:38 IST on 31 January 2025
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NEW DELHI - Emerging risks such as climate change and rising geopolitical uncertainty present significant challenges for insurers, according to the Economic Survey for 2024-25 (Apr-Mar), tabled by Finance Minister Nirmala Sitharaman in Parliament on Friday.
The survey highlighted that even though India's insurance market has continued its upward trajectory with total insurance premiums having grown 7.7% in FY24, the insurance penetration declined to 3.7% in FY24 from 4% in FY23. But insurance penetration is still below the global average of 7%, it said. "There is a notable gap in coverage that presents opportunities for insurers to expand their reach. By targeting tier 2 and 3 cities and rural areas where awareness and accessibility are limited, insurers can tap into new customer segments and stimulate growth," it said.
The survey pointed out that increasing life expectancy and a growing elderly population pose underwriting risks related to longevity and highlighted the widening pension gap. "Non-financial risks have gained importance alongside traditional financial risks," it said.
The survey said that the industry must address and manage concerns related to mis-selling, delayed claims settlements, artifical intelligence, cybersecurity, and third-party interactions. "A clear and quantitative understanding of risk appetite is essential for effective risk management," it said.
The survey said that innovative distribution models can facilitate the inclusion of underinsured customers who are already covered by government schemes such as the Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Fasal Bima Yojana, and Pradhan Mantri Jan Arogya Yojana. It further said that simplification, standardisation, and digitisation can help lead the way. End
Reported by Pallavi Singhal
Edited by Tanima Banerjee
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