Indias low insurance penetration calls for huge opportunity

As we all know that, having insurance in place is quite crucial for an individual, be it life or non-life insurance. Insurance often helps in protecting risks that life puts forth. Despite being such a critical thing, its penetration in India is quite low.

During the Confederation of Indian Industry’s (CII) 22nd Insurance & Pensions Summit, Insurance Regulatory & Development Authority of India (IRDAI) Chairman, Dr Subhash C Khuntia remarked, “The Indian insurance industry currently services only 10 per cent to 20 per cent protection requirements indicating a huge insurance protection gap of 80 per cent to 90 per cent in India.”

This shows a massive opportunity for the insurance players in India, said Khuntia. In India, the insurance penetration in terms of the premium is 3.76 per cent of the GDP, whereas the global average stands at 7.23 per cent of GDP as of March 2019. In fact, many developed nations have insurance penetration that is more than the global average.

He further added, “In the life insurance segment, India’s penetration is 2.82 per cent, whereas the world’s average is 3.35 per cent. Meanwhile, in the non-life insurance space, the penetration rate is 0.94 per cent as against the world’s average of 3.88 per cent. This means that we are just one-fourth of the world’s average.”    

Another benefit of the insurance industry is a growing economy. We were among the fastest-growing economies with the highest growth rate globally until last year. “I believe we will get back to growth track again once the pandemic gets over”, concluded Khuntia. 

India is the fifth-largest economy in terms of the nominal GDP and third in terms of purchasing power. This, in turn, gives more comfort to the insurance players for presenting protection schemes.

Also, India is the second-largest country in the world in terms of population with the age of more than half being below 30 years. Almost 62.5 per cent of the population is in the age group of 15 to 59. This depicts a low dependency ratio as our working population is quite high as compared to the western nations.

Having said that, people in India seek life insurance more as an investment product and think protection is its by-product. Hence, when we point out that the penetration is 2.82 per cent in the life insurance segment, it means, a major chunk is in traditional life insurance policies. We strongly believe that insurance companies should start campaigning for plain vanilla term life plans. This will indeed aid to increase the life insurance penetration in India as they are very reasonable for what it offers.