Both life and non-life insurance sector witnessed a decline in their penetration.
Even as the AUM and new business premium collection of insurance industry has increased in FY 2013-14, the insurance penetration and its density continued to decline for the fourth consecutive year.
The penetration of the insurance industry fell to 3.9% in FY 2013-14 compared to 4% in FY 2012-13. The penetration of the industry recorded its highest level of 5.20% in FY 2009-10 and 5.10% in FY 2010-11. Similarly, insurance density which was at its peak at 2010-11 with $64.4 has now slipped to only $52 in FY 2013-14, shows the IRDAI data. The insurance density was at $53 in FY 2012-13.
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).
“One of the main reasons for low levels of insurance penetration and density is the lack of awareness about the insurance products and the benefits of various insurance policies. Insurance education helps a consumer to understand their needs and risks, ascertain availability of insurance for managing risks, appreciate their value of possessing an insurance product and to know about the do’s & don’ts before and after purchase of an insurance policy,” said IRDAI.
IRDAI has urged insurance companies to reach out to rural population in order to increase insurance penetration and density. It said, “Given the vast number of villages in India, compared to which the spread of banks is limited, to remove the hindrances posed by the restrictions on acceptance of cash, the IRDAI had aligned the stipulation with that prevalent in the banking sector. This was also aimed at encouraging insurance companies to tap rural business effectively, consequently improving on insurance penetration and density.”
Life insurance sector recorded a decline in penetration for the fourth consecutive year. The life insurance sector’s penetration level stood at 3.1% in FY 2013-14 compared to 3.2% in FY 2012-13, 3.40% in FY 2011-12 and 4.60% in FY 2010-11. Similarly, insurance density stood at $41 in FY 2013-14 against $42.7 in FY 2012-13.
On the other hand, general insurance sector saw a flat growth in insurance penetration. It stood at 0.8% in FY 2013-14. Similarly, insurance density of non-life sector remained $11 last fiscal.