The annual report from the Insurance Regulatory and Development Authority of India (IRDAI) has raised concerns about the declining insurance penetration in the country. In the 2023-24 financial year, insurance penetration fell to 2.8%, down from 3.7% the previous year. This marks the second consecutive year of decline. Insurance penetration is a measure of the total premiums as a percentage of the country’s GDP. Despite a 6% increase in life insurance premium collections, the overall penetration has decreased.
India’s insurance penetration is much lower than the global average, which is 7%. The global average rose slightly from 6.8% in 2022. India’s insurance penetration was highest during the pandemic in 2021-22, when it reached 4.2%, but it has since dropped. The IRDAI report points out that this low penetration shows that many people in India are still not covered by insurance, which is a concern given the rising risks and challenges in the country.
Total premium income in India reached ₹11.19 trillion in 2023-24. Of this, life insurance premiums made up ₹8.30 trillion, growing by 6.06%. General insurance premiums amounted to ₹1.73 trillion, and health insurance premiums were ₹1.17 trillion. Health insurance includes personal accident and travel insurance.
In terms of claims, insurers paid ₹7.66 trillion in total. Life insurance accounted for ₹5.77 trillion, which is about 70% of the total claims. Health insurers processed 26.9 million claims, totaling ₹88,101 crore, with an average claim amount of ₹31,086.
Insurance density, which measures the average premium per person, grew slightly to ₹7,885 in 2023-24 from ₹7,636 the previous year. However, this is still much lower than the global average of ₹73,887. Life insurance density stayed the same at ₹5,810, while non-life insurance density increased to ₹2,075 from ₹1,826.
Private sector insurers performed better than public sector insurers, with private insurers seeing a 15% growth in premiums, compared to just 0.23% for public sector life insurers.
The Standing Committee on Finance, led by Jayant Sinha, recommended lowering the goods and services tax (GST) on term and health insurance products to make them more affordable. The committee also suggested launching awareness campaigns to educate the public about the importance of insurance. While there were hopes that the GST Council would lower GST rates for senior citizens, it decided to postpone any decisions on this matter.
Despite the decline in penetration, the IRDAI remains hopeful for growth in certain areas like health insurance and expects a 3% increase in premiums for 2024. However, rising wages and healthcare costs may keep health insurance prices high.
Source of Information:- https://www.business-standard.com/finance/insurance/claims-ratio-of-non-life-insurers-dips-to-82-52-in-fy24-irdai-report-124122300706_1.html
