IRDAI data shows that insurance industry’s penetration increased marginally to 3.70% in FY 2018-19 from 3.69% FY 2017-18. So far, the industry has recorded highest penetration of 5.2% in FY 2009-10.
Globally, Indian insurance market stood at 17th in terms of penetration. In fact, insurance penetration in India was much lower than the global average of 6%. In Taiwan, insurance penetration was 21%.
In terms of density, insurance industry witnessed an increase in density from $73 to $74 in FY 2017-18. Compared to advanced economies, India lags in terms of density. The global average of density is $682 compared to $74 in India; the highest density in the world is in Hong Kong with $8,863.
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 declined marginally 2.76% in FY 2017-18 to 2.74% in FY 2018-19. The insurance density of life insurers remained unchanged to $55 in FY 2018-19.
Non-life insurance industry meanwhile grew. The industry recorded a penetration of 0.97% in FY 2018-19 compared to 0.93% in FY 2017-18. The density of non-life insurers also grew marginally from $18 in FY 2017-18 to $19 in FY 2018-19.
The insurance industry has seen a rise and fall in its penetration levels since 2000. In its annual report, IRDAI states, during the first decade of insurance sector liberalization, the sector reported a consistent increase in insurance penetration from 2.71 percent in 2001 to 5.20 percent in 2009 after which there was a steady decline until 2014 (3.30%).