Insurance penetration in India rises marginally to 3.49%: Report

Insurance penetration, which is measured as a percentage of premiums to gross domestic product (GDP), saw a rise to 3.49 percent from 3.40 percent in FY17, according to the sigma report by global reinsurer Swiss Re. Life insurance penetration stood at 2.72 percent while general insurance penetration stood at 0.77 percent.

Insurance density or the premium per capita stood at USD 59.7 in India in FY17. The average for Asia stood at USD 343.1 while the global average was USD 638.3.

Global insurance premiums increased by 3.1 percent in real terms in 2016, a fairly solid outcome in an environment of moderate global economic growth, Swiss Re Institute's latest sigma report says. The report said that the main cause of the weaker global premium development compared to 2015 were the advanced economies but growth in many emerging markets – excluding China – slowed also.

Global life premium growth slowed to 2.5 percent in 2016 from 4.4 percent in 2015 as advanced market premiums contracted, while life premiums in the emerging regions together grew by more than double the long-term average. On the non-life side, global premiums grew 3.7 percent in 2016, reflecting relatively solid expansion among the emerging countries and another exceptional performance in China.

“Initiatives by the Chinese and Indian governments to develop speciality lines will support agriculture, liability and credit insurance, and rising household disposable income will likely boost demand for personal lines,” the report said.

The total insurance premium volume in India stood at USD 79311 compared to the global average of USD 4 732188. The world average for insurance penetration is 6.28 percent.

According to the report, in India, life premiums grew by 8 percent due to surging demand for immediate annuity plans -- this in part is driven by demonetisation. It also said that the surprise demonetisation of high-value notes in November 2016 is likely to have slowed growth at the end of the year, but the main impact will only be felt in 2017.

Emerging markets will likely fuel improvement in life premiums in the coming years, with China and India being the main growth drivers. Excluding China, overall emerging market life premium growth was significantly lower but still a hearty 5.7 percent, driven by gains in India, Indonesia and Vietnam.

The sigma report said that the digitalisation of insurance distribution is set to continue, but the pace of change will vary across markets. It added that digital channels will ultimately be used throughout the distribution process, from information gathering to purchase completion to after-sales service. But, it said that not all insurance transactions will migrate to online, and intermediaries will continue to play an important role.

The sigma report said that premiums are expected to increase by double digits this year and next. The rise of digital distribution channels, the expansion of bancassurance and the promotion of protection products will be key growth drivers.