India’s Insurance Sector Grows, Yet Lags Behind Global Averages

India’s general insurance sector is showing signs of growth, with penetration reaching 1 percent of GDP in the fiscal year FY24. This marks an increase from 0.9 percent in FY20, though it remains substantially below the global average of 4.2 percent and the North American benchmark of 8.9 percent, according to data released by ICRA.

In terms of insurance density, defined as premiums per capita, India has experienced a notable rise of approximately 32 percent. The average premium per person grew from $19 to $25 during the same period. Despite these improvements, the overall insurance penetration in India remains a small segment of the country’s savings landscape.

Sector Insights: Life and Health Insurance Trends

The life insurance sector reflects a mixed picture. Although density has reached an all-time high at $70, penetration has declined for the second consecutive year, now standing at 2.8 percent. This drop highlights ongoing challenges in expanding life insurance coverage among the population.

Health insurance coverage has shown a positive trend. According to the National Family Health Survey (NFHS), overall household health insurance coverage increased from 28.7 percent in NFHS-4 to 41 percent in NFHS-5. Notably, households in the lowest wealth index experienced the largest increase, with a rise of 14.5 percentage points. This shift has contributed to a narrowing of the protection gap between the richest and poorest households, reducing the disparity from 9 percentage points to just 4.7 points.

Addressing the Protection Gap

Despite these advancements, India faces a significant protection gap. The current sum assured stands at 24 percent of GDP, which is considerably lower than global leaders like Singapore. This gap underscores the urgent need for improved coverage against mortality and health risks among Indian households, which remain severely under-protected.

As the sector continues to grow, addressing these disparities will be crucial for enhancing the overall financial security of the population. The insurance industry’s trajectory suggests potential for further growth, yet significant challenges remain in achieving parity with global standards.