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The insurance sector in India has seen massive growth in recent years. But despite this growth, the performance of the Indian insurance sector is still way below that of its Asian competitors as revealed by the 2020-21 economic survey. The two main indicators used in this survey, namely insurance penetration and insurance density, show that India’s growth is much less than countries like Malaysia, Thailand, and China.
Among the two indicators, insurance penetration in India continues to be a bigger challenge as it has grown a marginal 1.05 percent in the last 18 years. This poor rate indicates that even though the population of the country has exploded, the number of people that have purchased insurance is very minimal. Let’s explore this topic further and understand what insurance penetration is and the findings of the economic survey in 2020-2021.
Insurance penetration is calculated as a percentage of the insurance premium to the country’s Gross Domestic Product (GDP). Insurance penetration is one of the main factors experts use to determine the development of the insurance sector in a country.
According to the economic survey 2020-21, the insurance penetration in India has grown from 2.71% in 2001 to 3.76% in 2019. But this marginal improvement was still lower than countries like Malaysia, Thailand, and China’s 4.72, 4.99, and 4.30% respectively in 2019. The insurance penetration in this survey was calculated for two different segments of the market- the life insurance segment and the non-life insurance segment.
The penetration in the non-life insurance segment dropped from 0.97 to 0.94% in 2018. But the penetration in life insurance segments showed a slight upward trend from 2.74 to 2.8% in 2018. These numbers are very low when compared to the global insurance penetration rate which was 3.35% for the life segment and 3.8% for the non-life segment.
India also had a low insurance density which was the second key factor in the economic survey. The insurance density is the ratio of insurance premium to the population of the country. The insurance density just like insurance penetration was measured for life and non-life insurance segments. The density was $58 and $19 in the life insurance segment and non-life insurance respectively. These numbers are alarming when compared to global insurance density which was $379 and $439 for the life insurance segment and non-life insurance segment respectively.
While the economic survey showed us that the insurance density and insurance penetration in India is very low, there were some positives statistics in it. Gross direct insurance premium has grown 24.2% in 2019 from last year with a total collection of 7.62 lakh crores. 54.75% of gross direct insurance premium was from renewal of premiums and the remaining was from new business.