The insurance industry witnessed a decline in its penetration and density due to continuous reduction in new business premium collection and low renewal rates.
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).
The penetration of the insurance industry fell to 3.3% in FY 2014-15 compared to 3.9% in FY 2013-14. The penetration of the industry was the highest at 5.20% in FY 2009-10 and 5.10% in FY 2010-11.
Similarly, the insurance density which was at its peak in 2010-11 with $64.4 has now slipped to $55 in FY 2014-15, shows IRDA data. The insurance density was at $52 in FY 2013-14.
In its annual report, IRDAI states, “During the first decade of insurance sector liberalization, the sector has reported consistent increase in insurance penetration from 2.71 percent in 2001 to 5.20 per cent in 2009. However, since then, the level of penetration has been declining reaching 3.3 per cent in 2014. A similar trend was observed in the level of insurance density which reached the maximum of USD 64.4 in the year 2010 from the level of USD 11.5 in 2001.”
Life insurance sector saw a decline in its penetration for the fourth consecutive year. The sector recorded a penetration of 2.6% in FY 2013-14 compared to 3.1% in FY 2013-14, 3.2% in 2012-13, 3.4% in 2011-12 and 4.4% in FY 2010-11. Meanwhile, the insurance density of life insurance industry increased slightly to $44 in FY 2013-14 as against $41 in the corresponding period last year.
On the other hand, the general insurance sector saw a marginal decline in insurance penetration from 0.8% in FY 2013-14 to 0.7% in 2014-15. Similarly, the insurance density of non-life sector remained unchanged at $ 11 in FY 2014-15.