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Insurance Penetration and density of insurance industry increase

Penetration and density of insurance industry increase

Penetration of the life insurance sector remains unchanged while non life saw a marginal growth.
Team Cafemutual Jan 8, 2018

The insurance industry has witnessed a growth in penetration and density due to increased business premium collection and improved renewal rates.

IRDAI’s annual report shows that the penetration of the insurance industry has grown to 3.49% in FY 2016-17 compared to 3.44% in FY 2015-16. 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 at $64 has now slipped to $60 in FY 2016-17. The insurance density was at $55 in FY 2015-16, that means density has marginally increased last fiscal.

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

In its annual report, IRDAI states, during the first decade of insurance sector liberalization, the sector has reported a consistent increase in insurance penetration from 2.71 percent in 2001 to 5.20 percent in 2009. Since then the level of penetration was declining. However, there was a slight increase in the years 2015 (3.44 percent) and in 2016 (3.49 percent). The level of insurance density reached the maximum of USD 64.4 in the year 2010 from the level of USD 11.5 in 2001. During the year 2016, the insurance density was USD 59.7.

In terms of segments, the penetration of life insurance industry remained unchanged at 2.72% in FY 2016-17. However, the insurance density of life insurers increased exponentially from $ 43.20 in 2015-16 to $ 46.50 in FY 2016-17.

On the other hand, the non-life insurance industry saw a marginal growth in its penetration. The industry recorded a penetration of 0.77% in FY 2016-17 compared to 0.72% in FY 2015-16. However, the density of non-life insurers grew marginally from$11.5 in FY 2015-16 to $13.2 in FY 2016-17. “Over the last 10 years, the penetration of non life insurance sector in the country remained steady in the range of 0.5-0.8 per cent. Its density has gone up from USD 2.4 in 2001 to USD 13.2in 2016,” said IRDAI.

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