Concerned over the slow growth of insurance sector in India and its dismal penetration, Finance Minister P Chidambaram Monday told insurance companies to stop “mis-selling” and resort to sale of simple products to capture the vast Indian market.
Mis-selling is the practice of a salesperson misrepresenting or misleading an investor about the characteristics of a product or service.
Many an unsuspecting customers have fallen prey to the practice of mis-selling by the insurance salespersons followed by delay in settlement claims. This is the sole reason, insurance penetration in India has been very low despite the sector was opened up for private players a decade ago.
“If you want to sell insurance in India, you must sell simple products and not mis-sell,” Chidambaram said, adding India’s savings, which currently was at 30 per cent of the gross domestic product, can be diverted to insurance sector only if people had enough faith in the product sold.
“Indians have a penchant for saving. In fact savings are the lifeline of Indian economy. but people will save in insurance and cover themselves against risk only if you sell them simple product, which they can understand and they donot feel that they are cheated by mis-sell, the finance minister said at the launch of a new brand of PNB Metlife following Punjab National Bank’s acquisition of a 30 per cent stake in the company..
Life insurance penetration in India is about 4.4 per cent of the GDP in terms of total premiums underwritten each year. That compares with 8 per cent in Japan and 9.5 percent in Britain. But, the general insurance penetration is a miniscule 0.7 per cent. This is far below the international bench marks and a vast geography in the country is still untapped.
The minister also expressed concern over life insurance penetration coming down in the past couple of years.
Life insurance penetration in India was higher than the world's average in 2010 and the combined average is higher than Brazil and Russia and most of other countries of Asia including Bangladesh, Pakistan, China and Sri Lanka.
“I think we should ask ourselves why in a country where demand for banking services is there, but no adequate demand for insurance,” Chidambaram said.