Page 20 - The Insurance Times October 2021

sum assured of Rs. 2 lakh! So, the commercial insurers have In the case of India, it has not happened signifying the
to go to the drawing board to design new strategies to existence of huge untapped potential. Let's consider another
insure the lives of Indians more heavily. important indicator of progress, Insurance Density in India
is USD 55 or Rs. 4,000 approximately. Now, how much life
This article is an attempt to analyse the data available in insurance can be purchased by a person of say 30 years of
the public domain to understand the reasons behind the low age, opting for a 25 year endowment policy? It will not be
Insurance Penetration and Density of the life insurance more than Rs. 1.5 lakh. If he buys term insurance, may be
sector of the country. Along with the data published by the coverage will be much more. But, a sound financial
IRDAI, I have used the findings of some research work planning through life insurance is possible only through
considered as top quality ones in the industry circle. Towards purchase of savings as well as protection products. Indians,
the end, some suggestions have been made to develop the in general prefer some returns at the end of the term or at
insurance market of the country. periodic intervals of time to be used to meet some heavy
expenses and as "Future Provisions", too. After all, each
We shall find that the solutions lie in the industry rethinking country has to develop products in sync with the socio-
its strategies as regards product development, distribution, economic conditions prevailing in the country.
customer sensitivity and usage of new transformative
technologies. As the economy is growing (with the exception Now, let us see the Insurance Penetration and Density of
of the current year, due to some extra-ordinary situations) some select developed and emerging countries.
and should continue to grow because of immense growth
potential, demographic advantages and aspirations of the Table-2: Insurance Penetration and
new generations, there is no reason why India can not be Density of select countries in 2018-19
among the most developed markets of life insurance industry
of the world. Countries Insurance Insurance
Penetration Density
What are the right Indicators of (%) in USD
Progress? France 5.75 2370
South Africa 10.27 669
This article started by mentioning that Insurance
Penetration and Insurance Density are alarmingly low in Switzerland 4.32 3555
India. Let us look at the Ratios that the country experienced United Kingdom 8.32 3532
for the last five years.
Japan 6.72 2629
Singapore 6.22 3944
Table-1: Insurance Penetration and
South Korea 6.12 1898
Density in India in the last five years
Taiwan 17.48 4320
Year Insurance Insurance Density Hong Kong 16.81 8204
Penetration (%) in USD
Source: IRDAI Annual Report, 2018-19
2014-15 2.60 44
2015-16 2.72 43.2 From Table-2, it is clear that all these countries are head
2016-17 2.72 46.5 and shoulders above India in terms of progress of the life
insurance industry although India is larger than each one of
2017-18 2.76 55
them in terms of population, market size and even GDP
2018-19 2.74 55
growth rates in recent years. The financial planning industry
Source: IRDAI Annual Report, 2018-19 is well developed in all these countries and mature stock
markets also exist there. But, people have a strong
Table-1 clearly shows that there is no significant preference for life insurance products not just as a protection
improvement in the accepted indicators of progress of the tool but also as savings and retirement planning tools. In
industry. In more than 66% of the countries, Insurance fact, life insurance industry contributes significantly for the
Penetration increases with the growth of the economy until growth and development of their national economies, as
the growth reaches a very high stage (like US for example). their savings are used for long term financing of various

20 The Insurance Times, October 2021