Insurance penetration in India experienced a dip for the second successive year in 2023-24 according to Insurance Regulatory and Development Authority of India (IRDAI) annual report for the financial year 2023-24. Industry sources say this is worrying and contrary to the global trend.
The IRDAI annual report for the year 2023-24 which was released in December 2024 reveals that Indian life insurance penetration has dipped to 2.8% in the financial year 2023-24. However, there was a 6% increase in premium collection by life insurance companies despite a dip in penetration.
The IRDAI annual report shows that India's insurance penetration (both life and general combined) dipped to 3.7% in 2023-24 as compared to 4% in 2022-23.
The insurance penetration for the life insurance industry marginally declined from 3% in the financial year 2022-23 to 2.8% during 2023-24. In the non-life or general insurance industry, the penetration remained at 1%.
Insurance penetration is a measure of the total amount of premiums paid in a year by the gross domestic product (GDP). It shows the popularity of insurance products and the extent to which people are covered by insurance.
This dip is worrying as India is a country with already low insurance penetration when compared to developed countries or the global average. Insurance penetration in the country had touched a high of 4.2% in 2021-22 on the back of the COVID-19 pandemic.
Globally, insurance penetration has gone up from 6.8% in 2022 to 7% in 2023. To enhance insurance penetration in India, all stakeholders, including government, insurance industry and the regulator will need to work on a well-planned strategy. They will need to look at newer sections of the society, especially in the rural areas that are still virtually untouched by insurance. Products will need to be made simpler and simpler with an innovative distribution ecosystem or embedded insurance.
The present-day insurers and intermediaries will need to adopt modern marketing technology to reach out to the prospective customers.
IRDAI is planning to launch insurance products that would be encompassing health insurance, life insurance, and property insurance under one plan. This will make it convenient for all stakeholders to manage one policy instead of maintaining separate policies for separate requirements. And finally, the government will need to bring down the taxes levied on insurance policies.