Economic Survey 2022: Covid brings life insurance penetration in India to global levels; industry logs Rs 628,731 crore premium income in FY21

India’s insurance penetration stood at 4.2 per cent as of 2020 and has seen a steady rise since 2001, when it was at 2.71 per cent, according to Economic Survey 2022, released on Monday. While the penetration for life insurance in India is 3.2 per cent and non-life insurance penetration is 1 per cent, it is on par with the global penetration (at 3.3 percent) for the life segment and lags the non-life segment at 4.1 percent in 2020, the economic survey said.

“While India is at par with international average in terms of insurance penetration for life insurance, we lag behind in terms of non-life insurance,  the survey noted.

Internationally, the potential and performance of the insurance sector are generally assessed on the basis of two parameters, namely insurance penetration, and insurance density.

Insurance penetration is measured as the percentage of insurance premium to GDP and insurance density is calculated as the ratio of premium to population (measured in USD for convenience of international comparison).

The insurance density in India increased from USD 11.5 in 2001 to USD 78 in 2020. In 2020, the density for Life insurance in India is USD 59 and Non-Life insurance is USD 19, much lower than global standards.

Globally, insurance density was USD 360 for the life segment and USD 449 for the non-life segment respectively in 2020.

During 2020-21, the gross direct premium (within and outside India) of Non-Life insurers was Rs 202,082 crore, as against Rs 192,193 crore in 2019-20, registering a growth of 5.2 percent.

Motor and health segments contributed a significant portion of the growth.

The life insurance industry recorded a premium income of Rs 628,731 crore during 2020-21, as against Rs 572,910 crore in the previous financial year, registering a growth of 9.74 percent.

While renewal premium accounted for 55.7 percent of the total premium received by the life insurers, new business contributed the remaining 44.3 percent.

The Economic Survey 2021-22 was presented by Union Finance Minister Nirmala Sitharaman today. The survey showed resilient growth in the insurance sector for the pandemic year 2020.