The decline in India’s insurance penetration from 4% in 2022-23 to 3.7% in 2023-24, as highlighted in the IRDAI’s Annual Report, underscores ongoing challenges in the insurance sector despite efforts to achieve the “Insurance for All by 2047” vision.
- This marks the second consecutive year of decline, emphasizing the need for enhanced strategies to address barriers.
Key Highlights
- Insurance Penetration vs. Density:
- Penetration: Fell to 3.7% in 2023-24 from 4% in 2022-23, indicating a decline in insurance premiums as a share of GDP.
- Density: Improved modestly to $95 from $92, reflecting a slight increase in per capita premium.
- Responsible Factors:
- Low Life Insurance Uptake: A cultural preference for financial products as investment tools, rather than protection plans, hinders the popularity of term insurance.
- High GST Rates: The current 18% GST on premiums deters potential buyers, and a recent decision to defer GST rate reduction exacerbates this issue.
- Global Comparison: India’s figures lag significantly behind global benchmarks of 7% penetration and $889 density.
- Measures to Improve:
- Customer Literacy: Strengthening awareness about the importance of protection-oriented insurance, especially term plans.
- Simplified Products: Designing easy-to-understand insurance solutions that appeal to broader demographics.
- Digital Integration: Utilizing technology to engage younger audiences and create seamless purchasing experiences.
- Community Partnerships: Collaborating with local organizations to build trust and drive penetration in underserved areas.
- Preventive Care: Integrating wellness and preventive care incentives to enhance the perceived value of insurance.
