Insurance penetration only 4.2% of GDP in India: SBI

Insurance suffers from poor penetration even 75 years after Independence country. Its size is only 4.2% of India’s GDP, according to recent calculations by the State Bank of India. Insurance penetration is used as an indicator of insurance sector development and is calculated as the ratio of total premiums to gross domestic product or GDP in a given year. SBI’s calculation is based on the latest data from the Insurance Regulatory and Development Authority of India (IRDAI).

A very small section of the country’s population of about 135 crore are customers of insurance.

This SBI research was done till March 2020. It does not include the post-pandemic picture. “The pandemic induced disruption did result in a behavioural change of households with the life insurance industry registering a smart growth, with new premium collections expanding by 7.5% and individual’s single premium growing by 36.19% in FY21,” said the SBI report.

The study expects that after the, till FY21 the insurance penetration figure of the country could be near 5.2%, if not less.

2.7% to 5.2% and then 4.2%

In 2000-01 insurance penetration of India was only 2.7% of the GDP. Over the next 20 years, insurance penetration increased by only 1.5% to 4.2% in FY20, which is one of the lowest rates of increase across the globe.

But SBI study revealed that between fiscal year 2006 and 2010, due to the liberalisation of the insurance sector the figure was up to 4.8%, 4.5%, 5%, 5.2% and 5.1%. After FY2010 the figure again dipped to 4%.

In FY2014 the figure further slipped to 3.3%. Then the figure rose to 4.2% in FY20 riding government insurance schemes such as Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). While PMJJBY provides accidental cover of Rs 2 lakh against a yearly premium of Rs 12, PMSBY offers life cover of Rs 2 lakh against an annual premium of Rs 330.

World picture

If we consider the global picture, Taiwan is the most insured country with penetration at 17.5% of the GDP. The next two slots are occupied by South Africa and the US at 13.7% and 12% respectively.

South Korea and the UK have a penetration rate of 11.6% and 11.2% of GDP. The world average is 7.3%.

Countries such as Canada, France, Italy and Japan have a higher penetration than the world average. They have 8.7%, 8.6%, 8.6% and 8.1% respectively.

Germany, Australia, and China rank just below the world average with 6.8%, 4.7% and 4.5% of their GDP. Brazil shares the same spot with India with 4.2% penetration of GDP.

Government schemes are leading

Till May 2021, almost 65 crore people have enrolled for various government insurance schemes and 17 crore for private insurance schemes.

Out of 65 crore enrolments 10.34 crore persons enrolled in PMJJBY and 23.40 persons in PMSBY with claim servicing ratios of 93.7% and 77.3% respectively, according to the SBI report.

Additionally, PM Jan Dhan Yojana also covers life insurance up to Rs 2 lakh, if the customer has a RuPay debit card. This is absolutely free of cost. According to SBI research till May 2021, a total of 31 crore people were covered under this scheme.

Interestingly, women’s share in insurance is increasing in India. In FY20, the women’s share was 32% in terms of number of policies. However, in the government-sponsored schemes, the women shares stand at 37% in PMSBY and 27% in PMJJBY.

Ayushman Bharat

To achieve universal health coverage, the government has launched Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and a total of 16.14 crore Ayushman cards have been issued to the scheme beneficiaries till April 2021, stated SBI.

Though states such as West Bengal, Punjab, and some other opposition-ruled states have not yet implemented PMJAY, but they also have their own health insurance schemes, said the study.

The approximate size of the health insurance now is Rs 58,572 crore, said the SBI report.