Protection-gap

Had the privilege of attending the International Seminar on ' Enhancing Insurance Inclusivity & Bridging the Protection Gap in India' in Mumbai today. Was a wee bit skeptical, given the long-winding title but the fact that the detailed study report of the National Insurance Academy, Pune on the Protection Gap in India with recommendations was to be released, spurred me on, to join.

?I never regretted my decision as this was a program of very high quality, though I was present only in the morning session. Shri. Debasish Panda, Chairman, IRDAI, the man on a mission set the narrative very clearly. Citing that ' Incredible India' was now 'Inevitable India' and the coming decade would be one of steep economic growth across sectors and insurance cannot be an exception, he said that India will be a big economic force on the global stage. While emphasizing the need for increased insurance penetration, he clearly articulated not once but twice, that 'The Customer' should be central to any decision of policy makers and actions of the various stakeholders.

?Shri Srinivasan Gopalan who mentored the research team spelt out the broad findings and what impedes higher insurance penetration, wherein he highlighted insurance awareness, affordability & Trust-deficit as some critical elements. The report itself on Protection-gap in six lines of business viz. Life, Health, Pensions, Property, Cyber & Crop was very well presented by the National Insurance Academy, Pune team in the form of infographics. An important learning for me -- Protection-gap measure differs widely from one line/class of business to another.

?The piece-de-resistance however, was the panel discussion of international experts moderated splendidly by Sanjay Kedia. Sanjay set the tone by thanking the Chairman for re-emphasizing that the ' Customer was the central point' and also mentioned how closely the research findings matched the customer expectations from the field. A single slide showing how a customer-centric insurance market could be built was telling-- 1) Improving claims experience for policyholders 2) Offering right coverage for the policyholders' risks 3) Charging a fair price 4) Incentivizing risk management 5) Financial stability of the insurance market.

?Olivier Mahul of the World Bank stressed that public-private partnership was fundamental to the reduction in protection-gap. Beyond a point, protection for an individual becomes unaffordable, especially in the face of NatCat perils and this is where there is need for the government to step in. He highlighted the success of this model in Morocco. Vijay Kalavakonda of the IFC was vocal that unless a robust system for fair and timely settlement of claims was created, protection-gap reduction would remain a pipe-dream. Taking the example of crop insurance, he insisted that delayed and unjust claim settlements could be a double whammy for the policyholder. In the name of financial inclusion, if his credit facility with banks is linked to crop insurance, the delay in claim settlement would lead to stoppage of credit facility as well. When asked if compulsory insurance was the way forward, he answered that without timely claim settlements, compulsion of insurance could lead to greater heartburn.

?W. Jean Kwon, Professor Greenberg School of Risk Management pointed out who will be responsible for reducing protection gap --1) The person/company whose risk it is, should be responsible for mitigating, controlling & manging the risk 2) The community or eco-system would assist him psychologically & economically. (Insurers will come in here) 3) The Government should provide a societal safety net in the face of extreme circumstances -- The last resort for losses unbearable by an individual/entity. He was quite opposed to incentivising people for buying insurance, something that would never, ever be successful. While agreeing with him, Lindelwe Lesley Ndlovu, CEO, African Risk Capacity said that incentives and subsidies, though ineffective in the long run, have helped shore up protection in the short term in Africa.

?Will have to study the research report in detail, match it to what the experts had to say and then look at the recommendations for reducing the protection-gap. An important takeaway -- Insurance is not the panacea for all risks. Sometimes it is too enormous for insurance and this is where the government is expected to step in.

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