The penetration of Indian insurance has grown marginally to 3.76% in FY 2019-20 from 3.70% in FY 2018-19, shows the latest IRDAI annual report.
The data shows that the industry had reported growth in its penetration between 2001 (2.71%) and 2009 (5.20%). However, the industry witnessed continuous decline to reach 3.30% in 2014. The penetration has started showing marginal improvement since 2015.
Insurance penetration in India was much lower than the global average of 7%. Insurance penetration was higher in countries like Taiwan (19.97%), South Africa (13.40%), USA (11.43%) and South Korea (10.78%).
In terms of density, insurance industry witnessed an increase in density from $74 in FY 2018-19 to $78 in FY 2019-20. Compared to advanced economies, India lags in terms of density. The global average of density is $818 compared to $78 in India; the highest density in the world is in US with $7495.
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).
In terms of segment, penetration of life insurance has gone up to 2.82% in 2019 from 2.74% in 2018. The level of life insurance density has increased to $58 in 2019 from $55 in 2018.
On the other hand, penetration of non-life insurance sector has fallen to 0.94% in 2019 from 0.97% in 2018. The density of non-life insurance density has remained unchanged at $19 since 2018.
“To give a fillip to insurance penetration, there is a need to facilitate innovations in the insurance sector, especially those triggered by technology. The extant regulatory framework may pose certain hindrances for regulated entities to try out new ideas or new technology,” said IRDAI.