A Decline in Insurance Penetration
India’s insurance penetration fell from 4% in FY23 to 3.7% in FY24, according to the Insurance Regulatory and Development Authority of India (IRDAI) annual report. This decrease is a setback for the country’s goal of achieving ‘Insurance for All’ by 2047, coinciding with India’s centenary as an independent nation.
Causes Behind the Decline
1. Life Insurance Penetration Shrinkage:
- Life insurance penetration dropped from 3% in FY23 to 2.8% in FY24, contributing significantly to the overall dip.
- Meanwhile, non-life insurance penetration remained steady at 1%.
2. Global Comparisons:
- India’s insurance penetration of 3.7% in FY24 remains far below the global average of 7%, which includes 2.9% for life insurance and 4.1% for non-life insurance.
- Developed economies like the US, South Korea, and the UK recorded penetration levels as high as 11.9%, 11%, and 9.7%, respectively.
Bright Spot: Improvement in Insurance Density
Despite the decline in penetration, India recorded an improvement in insurance density, which rose from $92 in FY23 to $95 in FY24.
- Non-Life Insurance Density: Increased from $22 to $25.
- Life Insurance Density: Remained unchanged at $70.
Insurance density reflects the per capita premium and has shown a consistent upward trend since 2016-17, signaling gradual progress in the sector’s accessibility.
IRDAI’s Vision for 2047
The IRDAI is committed to expanding insurance coverage across India, focusing on reaching the 1.4-billion population by 2047. The regulator has been working closely with insurance providers to ensure greater awareness, accessibility, and affordability of insurance products.
India’s Standing on the Global Stage
- Global insurance density was $889 in 2023, significantly higher than India’s $95.
- Countries like South Africa (11.5%) and South Korea (11%) highlight the gap India must bridge in achieving competitive insurance penetration levels.
Conclusion
The dip in insurance penetration in FY24 highlights the need for stronger initiatives to broaden the reach of life and non-life covers in India. While the steady increase in insurance density reflects growing accessibility, achieving the IRDAI’s ‘Insurance for All’ vision by 2047 will require sustained efforts in innovation, education, and regulatory support.
