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Insurance After years of decline, insurance penetration improves marginally

After years of decline, insurance penetration improves marginally

Both life and non-life insurance industry saw a marginal growth in their penetration levels.
Nishant Patnaik Dec 20, 2016

After witnessing decline for the last five years, the insurance industry has finally recorded a marginal growth in penetration and density as reflected in the new business premium collection and improved renewal rates.

The measure of insurance penetration and density reflects the level of development of the sector. While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium (in US $) to total population (per capita premium).

IRDAI’s annual report shows that the penetration of insurance industry has grown to 3.4% in FY 2015-16 compared to 3.3% in FY 2014-15. The penetration of the industry was the highest at 5.20% in FY 2009-10 and 5.10% in FY 2010-11.

Similarly, the insurance density which was at its peak in 2010-11 with $64 has now slipped to $55 in FY 2015-16. The insurance density was at $55 in FY 2014-15, that means density remained flat last fiscal.

In its annual report, IRDAI states, “During the first decade of insurance sector liberalization, the sector has reported consistent increase in insurance penetration from 2.71 per cent in 2001 to 5.20 per cent in 2009. Since then, the level of penetration was declining. However, there was slight increase in 2015 reaching 3.44 percent compared to 3.3 percent in 2014. A similar trend in the level of insurance density which reached the maximum of USD 64.4 in the year 2010 from the level of USD 11.5 in 2001. During the year under review 2015, the insurance density was USD 54.7.”

Experts attribute this marginal increase in insurance penetration to the growth in new business premium and renewal rates. In fact, IRDAI data shows that the new business premium of the industry grew by 23% in FY 2015-16 compared to a decline of 6% in FY 2014-15. Similarly, growth in renewal premium stood at 6% last fiscal.

In terms of segments, the life insurance industry saw a marginal growth in its penetration. The industry recorded a penetration of 2.7% in FY 2015-16 compared to 2.6% in FY 2014-15. However, the insurance density of life insurers declined slightly to $43 in FY 2015-16 as against $44 in the corresponding period preceding fiscal.

On the other hand, insurance penetration of non-life industry remained unchanged at 0.7% in FY 2015-16. However, the density of non-life insurers grew marginally from$11 in FY 2014-15 to $11.5 in FY 2015-16. “Over the last 10 years, the penetration of nonlife insurance sector in the country remained steady in the range of 0.5-0.8 per cent. However, its density has gone up from USD 2.4 in 2001 to USD 11.5 in 2015,” said IRDAI. 

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