Insurance Penetration in India Faces a Decline
India's insurance penetration, measured as the ratio of annual premium to GDP, has seen a dip for the second consecutive year in FY24. This decline follows a peak of 4.2% penetration in the wake of the Covid-19 pandemic. As per the latest report by the Insurance Regulatory and Development Authority of India (Irdai), the penetration rate stood at 3.7% in FY24, down from 4% in 2022-23.
The life insurance sector witnessed a marginal decline from 3% to 2.8% during the same period. Meanwhile, the non-life insurance sector maintained its penetration at 1%, unchanged from the previous year. Despite the overall decline, there was a modest increase in per capita premium (insurance density) from $92 in FY22 to $95 in FY23.
Contrasting Trends with Global Averages
India's experience diverges from the global trend, where insurance penetration in both life and non-life segments has risen. The global average penetration reached 7% in 2023, up from 6.8% in 2022. This highlights a unique challenge for India's insurance market, which needs to address the factors contributing to this downturn.
Sector-Specific Insights
In FY24, the life insurance industry recorded a premium income of Rs 8.3 lakh crore, reflecting a 6.1% growth, slower than the GDP increase. Private sector life insurers saw a 15.1% growth in premium, while public sector insurers grew by only 0.2%. The life insurance industry paid total benefits of Rs 5.8 lakh crore in 2023-24, constituting 70.2% of the net premium.
The non-life insurance sector underwrote a total direct premium of Rs 2.9 lakh crore, marking a 12.8% growth. This was largely driven by increased health insurance premiums and growth in motor insurance. General and health insurers settled 2.7 crore health insurance claims, paying Rs 83,493 crore towards claim settlements.
As of March 31, 2024, the insurance industry's investments stood at Rs 67.6 lakh crore, a 12.6% increase from the previous year. Life insurers accounted for 91.1% of these investments, while general insurers and reinsurers made up 7% and 1.9%, respectively.
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