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The Truth About Insurance

Key data about what insurance reforms have done for the country is either never collected, or never revealed

Last month, the Insurance Laws (Amendment) Bill, 2015 was passed by parliament. For long, this bill has been referred to as a sort of a litmus test of whether the government of the day was serious about economic reforms. On the opposing side, among those who are committed to opposing economic reforms, resisting the insurance bill was a given. By this measure, the passage of the bill--and support the it got in the Rajya Sabha from many of those reflexively opposed to the government--should be a green signal for the reforms.

The aspect of the bill which got the most attention and opposition was that of enhancing the FDI limit in private insurance companies. The logic for enhancing this limit that's generally put forward is that after years of insurance being opened up, Indians remain underinsured. The data always quoted is India's insurance density, which is the per capita premium underwritten as well premium underwritten as the ratio of GDP. Both of these are far below the global average.

What this actually means is that insurers and IRDA measure success by how much money the industry takes from customers, rather than how much insurance they have delivered and to how many people. These numbers do not tell us how much insurance cover is delivered, only how much money the industry has extracted from people. Supposedly, the reason that this industry exists is to deliver insurance. Which is, when a customer dies, how much money does his family get? How many customers have what amount of this cover? What is the ratio of the total premium collected to the cover provided?

Shockingly, this information either doesn't exist (meaning IRDA has not bothered to collate it), or it's a secret. My guess is that the answer would be scandalous, so it's never revealed. It's just the kind of thing that RTI was made for, don't you think?