The insurance industry has witnessed an increase in penetration and density due to growth in business premium collection and improved renewal rates.
IRDAI’s annual report shows that the penetration of the insurance industry has grown to 3.69% in FY 2017-18 from 3.49% in FY 2016-17. The industry has seen a rise and fall in its penetration levels since 2000’s. The penetration levels increased between years FY 2001-02 and FY 2009-10 (5.20%) after which there was a steady decline until 2014 (3.30%). So far, the industry has recorded highest penetration of 5.2% in 2009-10.
At $73 in FY 2017-18, insurance density reported its highest number till date. The previous high for insurance density was $64 in FY 2010-11.
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 terms of segments, the penetration of life insurance industry increased marginally from 2.72% in 2016 to 2.76% in FY 2017-18. However, the insurance density of life insurers increased substantially from $46.5 in FY 2016-17 to $55 in FY 2017-18.
Non-life insurance industry meanwhile grew at a faster pace. The industry recorded a penetration of 0.93% in FY 2017-18 compared to 0.77% in FY 2016-17. The density of non-life insurers also grew substantially from $13.2 in FY 2016-17 to $18 in FY 2017-18.
Compared to advanced economies, India lags in terms of penetration (world average 6.13% compared to 3.69% in India) and density ($ 650 compared to $ 73 in India).