LIC AAO — Descriptive Paper

Insurance penetration in India is low compared to other countries.? One reason is lack of awareness among people especially in rural areas. Many people see insurance as an expense and not as protection. Trust is also an issue because of mis-selling in the past. Distribution reach is limited in small towns. Efforts like digital distribution and simple products can improve penetration. India has one of the youngest populations in the world and incomes have been rising, but the household still keeps most of its savings in bank deposits, gold and property. Life insurance is often bought in the last week of the financial year to save tax, and once that purpose is served the policy is allowed to lapse. Term cover, which gives the highest cover for the lowest premium, is still unpopular because people feel they get nothing back if they survive. In smaller towns the agent is the only source of information and the agent sells the product that pays him more, so the customer ends up with a policy that suits neither his need nor his income. Long forms, medical requirements and slow settlement of claims in earlier years have added to the hesitation. Health insurance has grown faster in recent years because a hospital bill is visible and immediate, while a life cover is for something nobody wishes to think about. Employer cover reaches only the organised sector, which is a small part of the workforce.