INCREASING INSURANCE PENETRATION IN INDIA
Insurance penetration is the ratio of the percentage of total insurance premiums to gross domestic product. It tells us the level to which a market is being tapped. Thus insurance penetration is a tool to understand and identify the reasons of the success or failure and the degree of presence of insurance in the economy of a country.
Indian insurance is a flourishing industry, with several national and international players competing and growing at rapid rates. Thanks to reforms and the easing of policy regulations, the Indian insurance sector been allowed to flourish, with a period 2010-2015 projected to be the ‘Golden Age’ for the Indian ...view middle of the document...
General Insurance followed suit and was nationalized in 1973. General Insurance Corporation of India was set up as the controlling body with New India, United India, National and Oriental as its subsidiaries and process commenced from 1991. For this purpose Malhotra Committee was formed during this year who submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in 1999. Resultantly Indian Insurance was opened for private companies and Private Insurance Company effectively started operations from 2001. 11917.59 crores premium was earned by public non-life insurance companies in 2001-2002, and 467.65 crores by private non-life insurance companies.
For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and non-life segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe.
There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help joint venture partners to bring in funds for expansion.
There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow players to develop and price products for larger segments of society.
But still we realise that the market is highly under-penetrated, given India's population of nearly 115 crore. The larger issue is that of under-insurance. As per the IRDA statistics, the total amount of life cover or sum assured on the 26 crore policies in 2007-08 was merely Rs 23.96 lakh crore. This translates into average life cover per policy to just about Rs 98,000. Given India's current per capita income of around Rs 39,000 and average family size of 5.1, the amount covers only the six-month income of a typical family in India. This is a meagre amount and cannot be termed as financial security .
India's insurance sector, which is witnessing a rapid growth, is likely to touch about USD 400 billion in premium income by 2020 , making the country one of the top three life insurance and top 15 non–life insurance markets by 2020.
The year 1999 saw a revolution in the Indian insurance sector, as major structural changes took place with the ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership.
Indian insurance companies offer a comprehensive range of insurance plans,...