 "Insurance penetration in India dips to 2.8% despite premium growth: Irdai")
The annual report of Insurance Regulatory and Development Authority of India (Irdai) has reported a worrying dip in insurance penetration, which fell to 2.8 per cent in the 2023-24 financial year, down from 3.7 per cent the previous year. This marks the second consecutive decline in penetration, a measure of premiums as a percentage of the gross domestic product (GDP), despite a 6 per cent increase in premium collections by life insurers, the Irdai 2023-24 annual report showed.
India's insurance penetration lower than global average
India's insurance penetration remains significantly lower than the global average of 7 per cent, which rose from 6.8 per cent in 2022. Insurance penetration in India peaked at 4.2 per cent during the pandemic in 2021-22 but has since declined.
The Irdai report highlighted that low penetration reflects a lack of widespread insurance coverage, a pressing concern in a rapidly developing economy with rising risks and vulnerabilities.
Rs 11.19 trillion in premium income
Total premiums across all insurance categories reached Rs 11.19 trillion, Irdai said. Of this, life insurers in India recorded a premium income of Rs 8.30 trillion in 2023-24, registering a growth rate of 6.06 per cent. General insurance premiums made Rs 1.73 trillion and health insurance premiums Rs 1.17 trillion. Health insurance numbers include personal accident and travel insurance cover.
Rs 7.66 trillion paid in claims
In terms of claims settlement, insurers paid out Rs 7.66 trillion, with life insurance accounting for 70.22 per cent of net premium at Rs 5.77 trillion. Health insurers processed 26.9 million claims, paying Rs 88,101 crore, with an average claim amount of Rs 31,086.
Insurance density below global average
Insurance density, which measures per capita premium, grew marginally to $95 in 2023-24 from $92 the previous year. However, it remains far behind the global average of $889.
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Life insurance density remained stable at $70, while non-life insurance density increased to $25 from $22 last year.
Additionally, private sector insurers outperformed public sector players, recording a 15 per cent growth in premiums compared to 0.23 per cent for public sector life insurers.
GST on insurance premiums
The Standing Committee on Finance, chaired by Jayant Sinha, had recommended reducing the goods and services tax (GST) rate on term and health insurance products to alleviate the premium burden, which discourages many from purchasing policies.
The committee also emphasised the need for mass awareness campaigns to educate the public about the importance of insurance and its benefits.
Media reports ahead of the GST Council meeting had anticipated the lowering of GST on insurance premiums at least for senior citizens. However, the council decided to defer its decisions on the matter.
Irdai forecasts 3 per cent growth in premiums
Despite the decline in penetration, the Irdai remains optimistic about growth in specific segments like health insurance, forecasting a 3 per cent real-term growth in premiums for 2024. However, the regulator warned that rising wages and healthcare costs could keep health insurance pricing elevated.