Insurance penetration continues to be a challenge as it only marginally improved to 3.76 per cent in 2019 from 2.71 per cent in 2001, the Economic Survey 2020-21 shows. Insurance penetration is calculated as percentage of insurance premium to GDP.
The penetration in non-life segment, in fact, slipped to 0.94 per cent from 0.97 per cent in 2018. The life insurance segment recorded higher penetration at 2.82 per cent from 2.74 in 2018.
In contrast, insurance penetration in Asian countries such as Malaysia, Thailand and China stood at 4.72, 4.99 and 4.30 per cent, respectively in 2019.
"Globally insurance penetration was 3.35 per cent for the life segment and 3.88 per cent for the non-life segment in 2019. Although the penetration is lower in India for both, it is particularly low for non-life insurance as compared to other countries," says Economic Survey.
The insurance density, which is calculated as ratio of insurance premium to population, reached to $78 in 2019. It was at $11.5 in 2001.
Density for life insurance is $58 and non-life insurance is much lower at $19 in 2019 in India. Globally, insurance density was $379 for the life segment and $439 for the non-life segment respectively in 2019.
"United States has particularly high insurance density in the non-life category. India has extremely low insurance penetration as compared to global average and other comparable countries," says the Economic Survey report.
Sumit Bohra, President, Insurance Brokers Association of India counts lack of awareness and more paperwork among key reasons for low insurance penetration in India.
"There is lack of education amongst the customers and secondly customers consider it as a cost rather a long-term asset which may come to rescue one fine day. The low penetration can also be attributed to lot of paperwork, hence digitisation will help in improving the same. Lastly, complicated policy is also not helping the cause. Simple policies with benefit rather than indemnity could also help in deeper penetration," Bohra says.
The Economic Survey further states that the gross direct premium of non-life insurers registered a growth of 11.45 per cent at Rs 1.89 lakh crore in 2019-20 from Rs 1.69 lakh crore in 2018-19.
"Within non-life category, motor and health segments primarily are the main contributors to industry to report this growth," the Survey says.
Life insurance industry recorded a premium income of Rs 5.73 lakh crore in 2019-20, as against Rs 5.08 lakh crore in the previous financial year, registering a growth of 12.75 per cent.
"While renewal premium accounted for 54.75 per cent of the total premium received by the life insurers, new business contributed the remaining 45.25 per cent," the Survey highlights.