When discussing growth potential and opportunities in the insurance market, it’s crucial to understand Insurance Penetration and Insurance Density.
Insurance Penetration represents the ratio of total premiums collected (both Life and Non-Life) to the Gross Domestic Product (GDP). In India, it stands at 3% for Life insurance and only 1% for Non-Life insurance, totaling 4% as of 2022-23. Comparatively, the global average is 6.8%, with developed nations like the US and Canada reaching as high as 11%.
Insurance Density, on the other hand, measures the premium per capita in US dollars. Globally, the average insurance density is $853, whereas in India, it’s merely $90 as of 2022-23.
Estimates reveal that out of India’s approximately 30.48 crore vehicle fleet, 16.54 crore or 54% of vehicles remain uninsured, despite third-party insurance being mandatory. With 4 to 5 lakh road accidents occurring annually in India, and approximately 1.5 lakh of these being fatal, uninsured vehicle owners face substantial liabilities, sometimes amounting to crores. In response, IRDAI is considering a zero-tolerance policy to achieve 100% motor insurance, involving state transport departments to issue notices to uninsured vehicle owners, imposing fines (minimum Rs. 2000) and mandating insurance coverage.
In its vision document “Insurance for All by 2047,” IRDAI is undertaking various initiatives to ensure universal coverage of Life, Health, and Property insurance for all eligible Indians. The regulator’s approach focuses on availability, accessibility, and affordability to achieve this goal by 2047.
India faces an average protection gap of 83%, indicating that only 17% of losses are insured, the highest in the Asia Pacific region. Over the period from 1991 to 2021, only 8% of economic losses were covered by insurance. Additionally, a study suggests that only 6% of the insured population have adequate coverage. The COVID-19 pandemic has heightened awareness about the necessity for sufficient health and life insurance coverage.
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