Even after two decades of allowing private players, the penetration of Indian insurance industry is less than 5% of the GDP. IRDAI data shows that India’s insurance penetration has gone up from 2.71% of the GDP to 4.20% of the GDP between 2001-02 and 2020-21.
In terms of penetration, India is far behind the global average of 7.2% of the GDP. India is ranked 21 in terms of penetration. Countries like Taiwan, South Africa, the USA and South Korea report higher penetration of 17.40%, 13.70%, 12.00% and 11.60% respectively.
While the penetration of life insurance sector has gone up from 2.15% in FY 2001-02 to 3.20% FY 2020-21, non-life insurance penetration has gone up from 0.56% to 1.00% over the last 20 years.
Over the last one year, the penetration of Indian insurance has grown to 4.20% of the GDP in FY 2020-21 from 3.70% of the GDP in 2019-20.
Insurance density
Between FY 2001-02 and FY 2020-21, insurance density has increased from $11.50 in FY2001-02 to $78 in FY2020-21. The growth has been steady, barring a few ups and downs.
While life insurance density has gone up from USD 9.1 in 2001-02 to USD 59 in 2020-21, non-life insurance density has gone up from USD 2.4 to USD 19 during the corresponding period.
Globally, the overall insurance density stands at USD 809. The USA, Switzerland, Singapore and Netherlands report higher density at USD 7673, USD 7224, USD 5638 and USD 5022 respectively.
Over the last one year, the density has remained constant at USD 78.
Why penetration and density matter
Insurance penetration and density indicate level of development in the insurance sector.
While penetration is measured as the percentage of insurance premium to GDP. Insurance density is the ratio of premium to population (per capita premium).
