The Indian Insurance Market: A Growing Force in the Global Scenario

The Indian insurance market has witnessed significant growth in recent years, emerging as a major player in the global insurance industry. With a population of over 1.3 billion and a rapidly expanding middle class, India presents immense opportunities for insurance companies.

In life insurance business, India is ranked tenth in the world. India’s share in global life insurance market was 2.73 per cent during 2019. Compared to the previous year, the life insurance premium in India increased by 9.63 percent whereas global life insurance premium increased by 1.18 per cent.
In non-life insurance business, India is ranked 15 in the world. India’s share in global non-life insurance market was 0.79 per cent during 2019. Compared to the previous year, the non-life insurance premium in India increased by 7.98 per cent whereas global non-life insurance premium increased by 3.35 per cent.
Globally, the share of life insurance business in total premium was 46.34 per cent and the share of non-life insurance premium was 53.66 per cent during 2019. However, the share of life insurance business for India was high at 74.94 per cent while the share of non-life insurance business was at 25.06 percent.

Insurance Penetration and Density

Insurance penetration and density are two metrics, among others, often used to assess the level of
development of the insurance sector in a country. While insurance penetration is measured as the percentage of insurance premiums to GDP, insurance density is calculated as the ratio of premiums to population (per capita premium).
Insurance penetration which was 2.71 percent in 2001 has steadily increased to 3.76 percent in 2019(Life 2.82 percent and Non-Life 0.94 percent). Insurance penetration in some of the emerging economies in Asia, i.e., Malaysia, Thailand and China during the same year were 4.72, 4.99 and 4.30 percent respectively. The Insurance density in India which was USD 11.5 in 2001, reached to USD 78 in 2019 (Life- USD 58 and Non-Life – USD 20). The comparative figures for Malaysia, Thailand and China during the same period were USD 536, USD 389 and USD 430 respectively. Globally insurance penetration and density were 3.35 percent and USD 379 for the life segment and 3.88 percent and USD 439 for the non-life segment respectively in 2019.

Insurance penetration and density are two key indicators that measure the level of insurance coverage in a country. Insurance penetration refers to the percentage of insurance premiums in relation to the country’s GDP, while insurance density represents the per capita premium volume.

In India, insurance penetration and density have been relatively low compared to other countries. However, the scenario is changing rapidly. As the economy grows and awareness about the importance of insurance increases, more and more people are opting for insurance coverage.

The Indian government has also taken several initiatives to promote insurance penetration in the country. The introduction of various insurance schemes, such as Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY), has played a crucial role in bringing insurance to the masses.

Insurance Premium and Growth Potential

During the fiscal 2019-20, the gross direct premium of Non-Life insurers was ₹1,88,916 crores as against ₹1,69,448 crores, in the previous financial year 2018-19 registering a growth of 11.49 percent. Motor and health segments primarily helped the industry to report this growth.
During the fiscal 2019-20, Life insurance industry recorded a premium income of ₹5,72,910 as against ₹5,08,132 crores in the previous financial year, registering a growth of 12.75 percent. While renewal premium accounted for 54.75 percent ofthe total premium received by the life insurers, new business contributed the remaining 45.25 percent.

The Indian insurance market has witnessed a steady increase in insurance premiums over the years. According to the Insurance Regulatory and Development Authority of India (IRDAI), the total premium income of the Indian insurance industry reached INR 6.31 trillion (USD 89.1 billion) in the financial year 2019-20.

The growth potential of the Indian insurance market is immense. The low insurance penetration and density indicate a large untapped market. As the economy continues to grow and more people become financially aware, the demand for insurance products is expected to rise significantly.

Insurance companies are also diversifying their product offerings to cater to the evolving needs of the Indian market. Apart from traditional life and general insurance policies, companies are introducing innovative products such as health insurance, travel insurance, and cyber insurance.

Challenges and Opportunities

While the Indian insurance market presents lucrative opportunities, it also faces several challenges. One of the key challenges is the lack of awareness about insurance products and their benefits. Many people in India still consider insurance as an unnecessary expense rather than a risk management tool.

Another challenge is the distribution network. India is a vast country with diverse geographical and cultural landscapes. Insurance companies need to establish a robust distribution network to reach customers in remote areas.

However, these challenges also present opportunities for growth. Insurance companies can leverage technology to reach a wider audience and educate them about the importance of insurance. Digital platforms and mobile apps can simplify the insurance buying process and make it more accessible to the masses.

Furthermore, the government’s focus on financial inclusion and the push for a cashless economy through initiatives like Digital India and Jan Dhan Yojana are expected to drive insurance penetration in rural areas.

The Future of the Indian Insurance Market

The future of the Indian insurance market looks promising. With a young and growing population, increasing disposable incomes, and a favorable regulatory environment, India is poised to become one of the largest insurance markets in the world.

Insurance companies need to adapt to the changing needs of the Indian consumer and develop products that provide comprehensive coverage at affordable prices. They also need to invest in technology and digital infrastructure to enhance customer experience and streamline operations.

As the Indian insurance market continues to evolve, it will play a crucial role in driving economic growth and providing financial security to millions of individuals and businesses across the country.