India’s insurance coverage penetration fell to three.7 per cent in 2023-24 from 4 per cent within the earlier fiscal, regardless of the insurance coverage regulator’s sustained efforts to advance the ‘Insurance coverage for All by 2047’ imaginative and prescient, IRDAI’s Annual Report for 2023-24 confirmed.
The drop marks a second consecutive yr of decline, as insurance coverage penetration had already fallen to 4 per cent in 2022-23 from 4.2 per cent in 2021-22, elevating issues for policymakers.
The silver lining is that India’s insurance coverage density confirmed a modest rise to $95 in 2023-24 from a stage of $92 in earlier yr, the report tabled this previous week in Parliament confirmed.
- Additionally learn: GST Council: Insurance coverage Proposal Deferred, 18% on margin of promoting previous EVs
Insurance coverage density
Particularly, non-life insurance coverage density elevated from $22 to $25, whereas life insurance coverage density remained steady at $70. This upward development in insurance coverage density has been constant since 2016-17.
Nevertheless, India’s efficiency on insurance coverage penetration and density in 2023-24 remains to be a lot decrease than the general international studying of seven per cent and $889, respectively, in 2023.
Based on Sandip Goenka, CEO, ACKO Life, one of many key components contributing to the decline in insurance coverage penetration is the comparatively low uptake of life insurance coverage, notably time period plans.
“This stems from a deeply ingrained mindset the place monetary merchandise are considered primarily as funding instruments and time period insurance coverage, which serves as a pure safety plan, typically lacks enchantment as a result of it doesn’t supply tangible monetary returns. Altering this notion requires constant efforts like strengthening buyer literacy round safety merchandise, simplifying insurance coverage choices, and leveraging expertise to have interaction with youthful demographics. Leveraging digital ecosystems, integrating preventive care components, and fostering partnerships with group organisations will play an important position in reshaping how life insurance coverage is perceived and adopted in India,” Goenka stated.
- Additionally learn: Mid-life verify on medical health insurance
Life insurance coverage down
Whereas life insurance coverage penetration declined from 3 per cent in 2022-23 to 2.8 per cent in 2023-24, common insurance coverage penetration remained unchanged at 1 per cent.
The life insurance coverage business reported a 6.06 per cent progress in premium earnings in 2023-24 to ₹8.30 lakh crore, pushed by sturdy renewal premium earnings, IRDAI report confirmed.
The non-public sector life insurers have clocked a progress of 15.05 per cent in premium, whereas the general public sector life insurer recorded a progress of 0.23 per cent in premium.
The most recent decline in India’s insurance coverage penetration comes at a time when the GST Council has just lately deferred a important determination to cut back the GST charge on insurance coverage premiums. The present charge of 18 per cent, considered as a deterrent for residents contemplating insurance coverage, continues to weigh on shopping for selections.
Rationalisation of GST charge and 100 per cent FDI may turn out to be a booster dose for improved insurance coverage penetration in coming years, counsel business observers.
Tax Therapy
Trade observers attribute the drop in life insurance coverage demand in 2023-24 to the federal government’s finances determination altering the tax therapy of high-premium insurance policies, coupled with lowered disposable incomes among the many center class resulting from hovering meals inflation.
Additionally there was a shift in funding mindset away from funding oriented life insurance coverage merchandise to mutual funds and capital markets.
Throughout 2023-24, life insurers issued 291.77 lakh new insurance policies below Particular person Enterprise, out of which the general public sector Insurer issued 203.93 lakh insurance policies (69.89 per cent) and the non-public life insurers issued 87.84 lakh insurance policies (30.11 per cent). Whereas the non-public sector insurers registered a progress of 9.23 per cent, public sector insurers reported a de-growth by 0.18 per cent and the business registered a progress of two.48 per cent within the variety of new insurance policies issued towards their earlier yr.
As per a Swiss Re report, the Indian insurance coverage market skilled a slowdown resulting from rising inflation and alter in tax norms for high-ticket insurance policies.
Non-Life Sector Sizzles
Throughout 2023-24, the non-life insurance coverage business underwrote a complete direct premium of ₹2.90 lakh crore in India registering a progress of 12.76 per cent from the earlier yr. The contribution of public sector common insurers elevated by 8.88 per cent from ₹82,891 crore in 2022-23 to ₹90,252 crore in 2023-24.
Personal sector insurers (together with standalone well being insurers) have underwritten ₹1.88 lakh crore as towards ₹1.58 lakh crore in 2022-23.
Amongst varied segments below non-life insurance coverage enterprise, medical health insurance enterprise at ₹ 1.17 lakh crore premium is the biggest phase with a contribution of 40.29 per cent (38.02 per cent in 2022-23) of the overall premium. The medical health insurance phase reported progress of 19.50 per cent (21.32 per cent progress in 2022-23).
The general public sector common insurers collectively contributed to 35.03 per cent of the market share, whereas the non-public sector common insurers contributed to the remaining 64.97 per cent.
