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  • Insurance Insurance penetration declines in FY 2024: IRDAI

    Insurance penetration declines in FY 2024: IRDAI

    India stands at 25th rank in terms of global insurance penetration.
    Suhail Chagla Jan 17, 2025

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    IRDAI report reveals that the penetration of insurance in India has reduced to 3.7% in FY 2024 from 4% in FY2023.

    Insurance penetration is a measurement done by dividing the percentage of insurance premiums received during the year by the GDP of the country.

    In life insurance, the industry reported a decline to 2.8% in FY2024 from 3% in FY2023. On the other hand, non-life insurance’s penetration remained flat at 1% in 2024. 

    In comparison to global penetration, India is far behind the global average of 7%. India stood at 25th rank in global insurance penetration ranking. 

    While the global average in life insurance is 2.9%, the global average of non-life industry is 4.2% compared to just 1% of India. 

    Let’s look at the table to understand these figures:

    Regions

    Life Insurance penetration 2023

    Life Insurance penetration 2024

    Non-Life Insurance penetration FY2023

    Non-Life Insurance penetration FY2024

    Total (Life+Non-Life) 2023

    Total (Life+Non-Life) penetration FY2024

    India

    3

    2.8

    1

    1

    4

    3.7

    World

    2.8

    2.9

    4

    4.2

    6.8

    7

     

    Note: The data for India is for financial year i.e. between April  and March whereas for the world, it is of Calendar Year or period between January and December.

    Manoj Kumar Jain, Managing Director, Shriram Life Insurance attributes this decline to lack of awareness among people and complexity in understanding insurance policies.

    He pointed out that while the industry has grown in absolute terms, the penetration came down due to record GDP numbers.

    Dr S Prakash, former MD, Star Health & Allied Insurance and Chairperson, Health Sub Committee, CII Southern Region feels that the industry should focus on creating a positive experience for the consumers. Also, the industry should focus on offering better pricing and identifying the right technology to increase the number of policyholders, he added.

    Vighnesh Shahane, an industry veteran believes that insurance penetration should be measured in terms of number of people covered instead of premium received with respect to the size of GDP. 

    Have a query or a doubt?
    Need a clarification or more information on an issue?
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    6 Comments
    Dr. R S P SINGH · 3 weeks ago `
    I agree with Vignesh
    DEBRAJSENGUPTA · 3 weeks ago `
    The main issue with Insurance industry, both Life and General [ including Health] is despite efforts from IRDA and Insurance Companies top brasses attempt to cultivate the LONG-TERM outlook for prospective policyholders, the bottom-line sales force are only concentrating on % Commission and different junkies like foreign trips or Cash and/or Gift benefits under guise of different contests. This culture fails to provide adequate cover to the masses and only emphasis on collection of premiums and actively churning over 3-5 years to meet numbers. IRDA should make mandatory for Insurers to reward Agents based on Persistency and not solely on Fresh Business. No of lives covered by each agent should also be publicly advertised in Insurer's websites. Corporate agents like Banks should be encouraged to sell min 50% Term plans with coverage not less than INR 50Lacs. Failing to do so may result in lower payout.
    Viral Vora · 3 weeks ago
    Very true, Sir. Additionally, the commission structure for insurance advisors needs to be reformed. Currently, the first-year commission is very high, but from the second year onwards, it drops to single digits. This discourages advisors from providing ongoing services to policyholders.

    Furthermore, what is the relevance of foreign tours or achievements like MDRT, TOT, and COT in a country like ours? Shouldn’t the focus be on creating awareness and ensuring basic financial security for the masses?

    For instance, why aren’t insurance companies actively promoting the Saral Jeevan Bima term insurance plan, which is simple and affordable? What steps is IRDAI taking to address this gap and prioritize such essential initiatives? These are critical issues that need urgent attention.
    Reply
    Viral Vora · 3 weeks ago `
    My Views on Insurance Penetration in India

    Insurance penetration in India remains low despite decades of effort. One key reason is the lack of financial literacy as part of our education system. People are not taught the importance of financial security and insurance at an early age, leaving many unaware of its benefits.

    LIC, being the only life insurance provider for nearly 50 years, focused primarily on selling endowment and money-back policies. While these products offered returns, they didn’t prioritize social security, which should have been a cornerstone of life insurance. Even today, there is little effort to provide accessible information about insurance to lower-income groups. For example, while we can easily get travel insurance with a train ticket, obtaining a simple life insurance policy with a sum assured of ₹5–10 lakhs remains a challenge.

    Considering the size of India’s insurable population and the number of insurance companies in operation over the last 75 years, our penetration levels should be much higher. Unfortunately, neither the LIC chairpersons nor the IRDAI leadership have made this a priority.

    Private insurance players have been in the market for the last 23 years and have created awareness, but their primary focus remains on profitability. This has led to concerns about claim repudiation, which discourages people from trusting private insurers. Mis-selling is another significant issue, and while the Finance Minister has highlighted that banks should focus on their core business, IRDAI has taken limited action to address these problems.

    I believe that a higher regulatory authority should be established to oversee all regulatory bodies like IRDAI, SEBI, and PFRDA. Such an authority could ensure better coordination and stronger actions to protect the interests of the people, ultimately leading to better insurance penetration in India.
    SALIL GUPTA · 3 weeks ago `
    The premium includes the investment part too, so is the insurance penetration really a right measure as it is calculated? I would really like to know -how much this figure will be if only mortality based premium is considered ? My gut feel estimate is may be less that 0.1%
    Sham Kumar Saini · 2 weeks ago `
    When Insurance Paneteration is on decline despite setting up of IRDAI and Opening up of Insurance Sector in 2000, will Hon PM ji and Hon FM ji make IRDAI Chairperson and CEOs of Insurance Companies answerable as to why they are not able to Enhance Insurance Peneteration?
    Why are they not able to figure out the reasons and could not provide solutions even after two decades?
    What use of having IRDAI and its frequent introduction of Changes in Insurance Sector which has infact decreased the Insurance Paneteration and also shattered the Trust, Faith and Intrest of Customers in Insurance. Maturity Proceeds has been on decline and Insurance Premiums has been increased but these issues are never addressed by IRDAI and Govt of India. Commission too has been curtailed with introduction of Claw Back Clause which shall deter Insurance Agents to join and remain in Insurance Sector.
    Government of India, IRDAI and Insurance Companies must look into these issues and rectify them as early as possible so that Agency Force which brings in 95% of Life Insurance Business can be retained in.
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