1. Introduction
Insurance industry plays a pivotal role for the socio-economic development of a country.
The life insurance market in India has recorded a consistent premium growth over the years. During 2022-2023, the Life insurance industry recorded a premium of Rs.7.83 lakh crore registering 12.98% growths. The private sector life insurers have clocked a growth of 16.34% in premium, while the public sector life insurer recorded 10.90% growth in premium. The main object of the present study is to show there are several infrastructural and administrative problems for the development of insurance sector. It results low insurance density and low insurance penetration in India.
2. Position of life insurance companies
At present twenty four life insurance companies are operating in India, of which twenty three life insurance companies are private and one is public sector.
Table: 1 Premium Underwritten by Life Insurers (Rs Crore)
| Insurer | 2020-2021 | 2021-2022 | 2022-2023 |
| Premium underwritten by private life insurance companies | 2,25,444.48
(16.50%) |
2,64,589.17
(17.36%) |
3,07,835.83
(16.34%) |
| Premium underwritten by Life Insurance Corporation of India | 4,03,286.55
(6.30%) |
4,28,024.97
(6.13%) |
4,74,668.14
(10.90%) |
| Industry Total | 6,28,731.04
(9.74%) |
6,92,614.14
(10.16%) |
7,82,503.97
(12.98%) |
Source: IRDA Annual Reports 2020-21, 2021-22 and 2022-23
Note: Figures in the brackets represent the growth over the previous year in per cent.
During 2022-23, the life insurance industry registered a growth of 12.98% in the premium underwritten against the previous financial year 2021-22. But the rate of growth is high in case of private life insurance companies and the growth is 16.34% than the public life insurance companies i.e. the Life Insurance Corporation of India (10.90%) during 2022-23 against the previous financial year 2021-22. The total premium underwritten by the Life Insurance Corporation of India was Rs 4, 74,668.14 crore during 2022-23.
3. New individual life insurance policies issued
The growth of life insurance industry depends on number of policies particularly number of new individual policies issued by life insurance companies.
Table: 2 New Individual Policies Issued (in lakh)
| Year | New Policies issued by LICI | New Policies issued by Private Life Insurance Companies | Total |
| 2020-2021 | 209.75 | 71.52 | 281.27 |
| 2021-2022 | 217.19 (3.54%) | 73.94 (3.38%) | 291.13 (3.51%) |
| 2022-2023 | 204.24 (-5.96%) | 80.42 (8.77%) | 284.7 (-2.77%) |
Source: IRDA Annual Reports 2020-21, 2021-22 and 2022-23
Note: Figures in bracket indicates the growth in per cent over the previous financial year.
During 2022-23, the life insurance industry registered a declining trend in growth of (-) 2.77% in the number of policies issued against the previous financial year 2021-22. Although the private life insurance companies registered a growth of 8.77% in the number of policies issued against the previous financial year but the public life insurance company registered a declining trend in growth of (-)5.96% in the number of policies issued against the previous financial year.
4. Insurance Agents
An insurance agent is an individual appointed by an insurer for the purpose of soliciting or procuring insurance business including business relating to continuance, renewal or revival of policies of insurance. No individual shall act as an insurance agent for more than one life insurer, or general insurer and one health insurer and one each of the specialized insurers.
Table: 3 Insurance Agents Associated with Life Insurers
| Insurer | No. of agents as on 31.03.2022 | No. of agents appointed during 2022-23 | No. of agents as terminated during 2022-23 | No. of agents as on 31.03.2023 |
| Private Sector | 11,16,177 | 4,93,473 | 3,28,767 | 12,80.883 |
| Public Sector | 13,26,432 | 3,92,337 | 3,71,444 | 13,47,325 |
| Total | 24,42,609 | 8,85,810 | 7,00,211 | 26,28,208 |
Source: IRDA Annual Reports 2020-21, 2021-22 and 2022-23
From the above table it is observed that the number of individual agents as at March 31, 2023 was 26.28 lakhs as against 24.43 lakhs as at March 31, 2022. The life insurance industry showed a growth of 7.60% in number of agents over the previous year. As at March 31.2023, the number of agents with the public sector stood at 13.47 lakhs and the corresponding number for private sector insurers was 12.80 lakhs. This is not a favorable position for the public sector life insurance company.
5. Commission expenses ratio
At present twenty three life insurance companies are operating in India, of which twenty two life companies are private and one is public sector. Out of the twenty four life insurance companies seventeen companies reported profits during 2022-2023.
Table: 4 Commission Expenses Ratio
| Items | 2020-2021 | 2021-2022 | 2022-2023 |
| Profit after tax | Rs 8,660 crore | Rs 7,751 crore | Rs.42,788 crore |
| Commission expenses ratio | 5.25% | 5.18% | 5.41% |
Source: IRDA Annual Reports 2020-21, 2021-22 and 2022-23
It is observed that profit after tax was Rs 7,751 crore during 2021-22 whereas profit after tax was Rs42,788 crore during 2022-23. Profits of life insurance industry grew by 452% in 2022-23 as compare to 2021-22. But the commission expenses ratio slightly increased to 5.41% in 2022-23 from 5.18% in 2021-22.
6. Insurance Penetration and Insurance Density
Insurance penetration and insurance density are two important terms used in the insurance sector to assess the stage of development of insurance sector in the country. Insurance penetration is measured as the percentage of insurance premiums to Gross Domestic Product (GDP). The insurance penetration of non-life insurance sector in India is remained at 1% in the year 2021-22 and 2022-23. India’s overall insurance penetration reduced to 4% in 2022-23 from the level of 4.2% in 2021-22. Insurance density is calculated as the ratio of insurance premium to population..
Table: 5 Insurance Penetration and Insurance Density in India and Globe (2022-23)
| Country | Insurance Penetration | Insurance Density | ||||
| Life Insurance | Non-Life Insurance | Total | Life Insurance | Non-Life Insurance | Total | |
| United States of America | 2.6 | 9.0 | 11.6 | 2,017 | 6,868 | 8,885 |
| United Kingdom | 8.1 | 2.4 | 10.5 | 3,669 | 1,111 | 4,781 |
| Switzerland | 3.0 | 3.9 | 6.9 | 2,730 | 3,634 | 6,364 |
| France | 5.5 | 3.2 | 8.7 | 2,239 | 1.339 | 3,578 |
| Germany | 2.4 | 3.5 | 5.9 | 1,182 | 1,699 | 2,881 |
| South Korea | 5.4 | 5.7 | 11.1 | 1,705 | 1,836 | 3,541 |
| Japan | 5.9 | 2.3 | 8.2 | 1,942 | 748 | 2,690 |
| India | 3.0 | 1.0 | 4.0 | 70 | 22 | 92 |
| World | 2.8 | 4.0 | 6.8 | 354 | 499 | 853 |
Source: Swiss Re, Sigma Reports on World Insurance4/2022 and 3/2023
As per Swiss Re Sigma World Insurance Report, globally insurance penetration was 2.8 per cent for the life insurance sector and 4 per cent for the non-life insurance sector. Overall, insurance penetration was 6.8 per cent in 2022. It is seen from the above table that insurance density is nearly ninety times more in USA and fifty times more in United Kingdom than that of India. The world average insurance density is 354 and India’s position is far below than the world position.
7. Suggestions and conclusion
7.1 Since private life insurance companies are functioning with new innovative products and ideas so Life Insurance Companies of India (LICI) has to change its administrative and business strategies for the benefit of its future course of business and for the benefit of policy holders.
7.2 As the newly coming private life insurance companies are mainly trying to enter the untouched rural areas so LICI has to arrange insurance awareness programme in the rural areas to expand their business.
7.3 The agents play a pivotal role for the growth of life insurance industry. Incentive schemes for the agents of life insurance companies are to be introduced by both private and public life insurance companies. Agents motivate people to take life insurance policy and expand the life insurance coverage. So different incentive schemes like bonus, commission, medical facility, insurance facility, vehicles facility and other incentives are to be provided.
7.4 The life insurance sector earned a profit after tax of Rs.42, 788 crore but commission expenses ratio was only 5.41% during 2022-23. As agents play a significant role in the insurance sector so commission expenses ratio must be increased for the benefit of the insurance agents both of public sector life insurance companies and private sector life insurance companies.
7.5 As the insurance density and insurance penetration in India is very low than the globe so both twenty three private life insurance companies and one public life insurance company have to play a crucial role to enhance the insurance density and insurance penetration not only for the development of insurance sector but also for the development of the country as a whole.
