Insurance Penetration

Insurance Penetration
Context: In yet another remarkable move, both the houses of Parliament have passed the Insurance Amendment Bill in the budget session. The Bill amends the Insurance Act 1938, increasing the FDI limit from 49% to 74%.
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Insurance Penetration by MIC Global 5 August 2019 1 June 2022
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Why is insurance penetration important? The recent intense Tropical Cyclone Idai, one of the worst tropical cyclones on record to affect Africa and the Southern Hemisphere, is a good case to look at.
This storm was long-lived and caused catastrophic damage in Mozambique, Zimbabwe, South Africa and Malawi, leaving more than 1,200 people dead and thousands more missing.
Cyclone Idai made landfall in Mozambique March 14 and 15, 2019 as a Category 2 storm. Then, a few weeks after, Cyclone Kenneth came ashore in northern Mozambique April 25, 2019, with hurricane-force winds and heavy rains. The storm arrived only six weeks after Cyclone Idai devastated a broad area of the country about 600 miles south of Cyclone Kenneth’s impact zone
The basic facts of the Cyclone Idai are:
However almost nothing was insured, so very few of the people affected were able to obtain prompt financial assistance for the loss of their belongings property and life.
Insurance provides a critical safety net for households, preventing them from falling into poverty by avoiding the damaging costs of emergencies such as the ones being felt from the above cyclones.
Specifically the new low cost microinsurance schemes are designed to grow insurance programs and are aimed at helping low-income people avoiding difficult, often devastating risk coping measures following such issues. This can be putting children to work, eating less food, or selling productive assets. All these have long terms impact on peoples growth.
Increasing insurance penetration promotes access to vital services, including health and agricultural services, and can promote healthier and more productive decisions.
How is insurance penetration measured? Penetration rate indicates the level of development of insurance sector in a country. Penetration rate is measured as the ratio of premium underwritten in a particular year to the GDP.
Looking at the overall figures for insurance penetration. In Emerging Asia, property insurance penetration is very low at just 1.1% – only slightly above the figures for sub-Saharan Africa. In India, the Philippines and Indonesia, insurance penetration is a feeble 0.5–0.6%. Compared to Asia’s developed countries with an average insurance penetration level of 2.4% – which is similar to western Europe – the US shows an insurance penetration of 3.3%.
These low levels of insurance penetration are particularly problematic in African and Asian countries, as many of them are exceedingly prone to natural catastrophes.
Apart from the humanitarian tragedies with high numbers of casualties, property losses after natural catastrophes invariably cause serious economic setbacks.
Studies have proven that high insurance penetration significantly reduces or even balances out these negative effects. The positive economic effect of risk transfer is thus particularly strong in emerging economies.
Social programs and technology is here now to support the delivery of microinsurance and new insurance programs to these countries. We are developing parametric solutions and programmes to support this backed up with AI and Machine Learning tech.
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Data extracted on 07 Sep 2022 05:21 UTC (GMT) from OECD.Stat
OECD countries, Selected African, Asian and European countries, Selected Latin American countries
The insurance industry is a key component of the economy by virtue of the amount of premiums it collects, the scale of its investment and, more fundamentally, the essential social and economic role it plays in covering personal and business risks. The "OECD Insurance Statistics" publication provides major official insurance statistics for all OECD countries. The reader will find information on the diverse activities of this industry and on international insurance market trends. The data, which are standardised as far as possible, are broken down under numerous sub-headings, and a series of indicators makes the characteristics of the national markets more readily comprehensible. This publication is an essential tool for civil servants, businessmen and academics working in the insurance field. In 2016, a new supervisory framework for insurance and reinsurance companies was implemented in the European Union (EU) and the European Economic Area (EEA). This framework includes harmonised reporting requirements across EU/EEA countries. These requirements led to changes in national data collection, which may hamper the data comparability with the ones collected before 2016 for some countries which only collect data with the Solvency II framework.
This part consists of tables by indicators, which reflect the most significant characteristics of the OECD insurance market. In most cases, the tables contain data of all OECD countries as well as aggregated "OECD" data from 1983 to 2020, for the following categories: - life insurance, - non-life insurance - and total. The premiums amounts are converted from national currencies into US dollar. Exchange rates used are end-of-period exchanges rates for all variables valued at the end of the year, and period-average for variables representig a flow during the year.
OECD countries, Selected African, Asian and European countries, Selected Latin American countries
The insurance industry is a key component of the economy by virtue of the amount of premiums it collects, the scale of its investment and, more fundamentally, the essential social and economic role it plays in covering personal and business risks. The "OECD Insurance Statistics" publication provides major official insurance statistics for all OECD countries. The reader will find information on the diverse activities of this industry and on international insurance market trends. The data, which are standardised as far as possible, are broken down under numerous sub-headings, and a series of indicators makes the characteristics of the national markets more readily comprehensible. This publication is an essential tool for civil servants, businessmen and academics working in the insurance field. In 2016, a new supervisory framework for insurance and reinsurance companies was implemented in the European Union (EU) and the European Economic Area (EEA). This framework includes harmonised reporting requirements across EU/EEA countries. These requirements led to changes in national data collection, which may hamper the data comparability with the ones collected before 2016 for some countries which only collect data with the Solvency II framework.
This part consists of tables by indicators, which reflect the most significant characteristics of the OECD insurance market. In most cases, the tables contain data of all OECD countries as well as aggregated "OECD" data from 1983 to 2020, for the following categories: - life insurance, - non-life insurance - and total. The premiums amounts are converted from national currencies into US dollar. Exchange rates used are end-of-period exchanges rates for all variables valued at the end of the year, and period-average for variables representig a flow during the year.

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Economic Survey 2020-21: Insurance penetration 'extremely low' at 3.76%
Insurance penetration is calculated as percentage of insurance premium to GDP. The penetration in non-life segment, in fact, slipped to 0.94 per cent from 0.97 per cent in 2018. The life insurance segment recorded higher penetration at 2.82 per cent from 2.74 in 2018

Aprajita Sharma Jan 29, 2021, Updated Mar 10, 2021, 1:52 PM IST
Insurance penetration continues to be a challenge as it only marginally improved to 3.76 per cent in 2019 from 2.71 per cent in 2001, the Economic Survey 2020-21 shows. Insurance penetration is calculated as percentage of insurance premium to GDP.
The penetration in non-life segment, in fact, slipped to 0.94 per cent from 0.97 per cent in 2018. The life insurance segment recorded higher penetration at 2.82 per cent from 2.74 in 2018.
In contrast, insurance penetration in Asian countries such as Malaysia, Thailand and China stood at 4.72, 4.99 and 4.30 per cent, respectively in 2019.
"Globally insurance penetration was 3.35 per cent for the life segment and 3.88 per cent for the non-life segment in 2019. Although the penetration is lower in India for both, it is particularly low for non-life insurance as compared to other countries," says Economic Survey.
The insurance density, which is calculated as ratio of insurance premium to population, reached to $78 in 2019. It was at $11.5 in 2001.
Density for life insurance is $58 and non-life insurance is much lower at $19 in 2019 in India. Globally, insurance density was $379 for the life segment and $439 for the non-life segment respectively in 2019.
"United States has particularly high insurance density in the non-life category. India has extremely low insurance penetration as compared to global average and other comparable countries," says the Economic Survey report.
Sumit Bohra, President, Insurance Brokers Association of India counts lack of awareness and more paperwork among key reasons for low insurance penetration in India.
"There is lack of education amongst the customers and secondly customers consider it as a cost rather a long-term asset which may come to rescue one fine day. The low penetration can also be attributed to lot of paperwork, hence digitisation will help in improving the same. Lastly, complicated policy is also not helping the cause. Simple policies with benefit rather than indemnity could also help in deeper penetration," Bohra says.
The Economic Survey further states that the gross direct premium of non-life insurers registered a growth of 11.45 per cent at Rs 1.89 lakh crore in 2019-20 from Rs 1.69 lakh crore in 2018-19.
"Within non-life category, motor and health segments primarily are the main contributors to industry to report this growth," the Survey says.
Life insurance industry recorded a premium income of Rs 5.73 lakh crore in 2019-20, as against Rs 5.08 lakh crore in the previous financial year, registering a growth of 12.75 per cent.
"While renewal premium accounted for 54.75 per cent of the total premium received by the life insurers, new business contributed the remaining 45.25 per cent," the Survey highlights.
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