Government should set up insurance index to measure progress: Study

New Delhi: The government should put in place an index for insurance penetration to be quantified as a measure of financial and social progress, says an Assocham-Crisil joint study.

By including insurance parameter in the measure, it is possible to get a more holistic view of the extent of financial under-penetration, the study reasoned.

Such an index could also be used by relevant industry players and policymakers to move towards financial inclusion and reach out to potential markets, it noted. At 3.9 per cent (2013-14), insurance penetration in India paints a grim picture against the world average of 6.3 percent, largely due to limited financial awareness and literacy among masses.

Besides, India is also far behind advanced economies on insurance density, which is measured as a ratio of premium to total population, unlike insurance penetration, which is a ratio of premium to gross domestic product (GDP).

"There is a considerable amount of misinformation about insurance in the mind of an average Indian investor. So, there is clearly a need to change people's perceptions and outlook on insurance," noted the study.

Highlighting various potential characteristics of an insurance index, the study said penetration of various kinds of insurance like micro-insurance, livelihood and others should be considered to ensure inclusive growth.

According to the study, distribution remains the key to enhancing insurance penetration in India as distributors playa pivotal role in educating and advising clients on the need and suitability of investment products.

Besides, it is also important to know the number of female policyholders to gauge whether insurance and financial services are accessible to both genders equally, it said.