Page 145 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 133

Transforming Re/Insurance in India

to Bridge the Protection Gap

- Amit Kalra
14 Managing Director and Head Swiss Re GBS Centres India

The world today faces some of the greatest social, political, and economic challenges ever. India,
like most developing nations, could bear a disproportionate share of the brunt.

Most parts of India are prone to one or more types of natural hazards – seismic hazards (earthquakes
and tsunamis), tropical cyclones, floods, landslides, and droughts. However, natural catastrophe coverage
across India is one of the lowest in the world, at less than 5 per cent, according to the Swiss Re Institute
resilience index (I-RI). This indicates that 95 per cent of physical assets exposed to damage from natural
catastrophes remain uninsured, significantly above the global average of 75 per cent. 1

Rising temperatures are leading to both intense rainfall and a higher risk of drought, with around
75% of India’s districts being extreme climate event hotspots. 2

If we look at agriculture, one of the most crucial and most vulnerable of all economic activities,
more than half of India’s workforce is either engaged in agriculture or closely connected to it. The need
to protect this segment has never been stronger as research shows that farmers can lose up to 15% of
3
their income during Kharif and 7% during rabi crop for every 100 mm deficit in average rainfall. Re/
insurance can help in reducing the risks faced by agriculture and all other industries. However, there are
some gaps on this front.

1. Building Resilience by Closing the Protection Gap

India’s insurance market has grown at a CAGR of 17 per cent over the past two decades. At the end
4
th
of 2022, India was ranked 11 in the global insurance business and is poised to become the sixth-largest
insurance market in the world by 2032, with insurance premiums growing at 14 percent annually.

The Economic Survey 2022-23 revealed that insurance penetration in India expressed in terms of
premium as a percentage of GDP, was a meagre 4.2 per cent in 2021, albeit an improvement over the
3.76 per cent in 2020. This comprised 3.2 per cent penetration of life insurance and one per cent penetration
of non-life insurance. India has a 92 per cent protection gap, which means that for every 100 rupees
Indian families need to protect themselves, they only have savings and protection worth 8 rupees.
1 2022-june-sigma-resilience-index-en.pdf (swissre.com)

2 74% of India’s districts prone to extreme climate like droughts, floods & cyclones, says study (the print.in)
3 Climate change will worsen India’s farm crisis, increase income inequality, finds report (scroll.in)
4 https://lifeinsurance.adityabirlacapital.com/life-insurance-basics/introduction-to-the-life-insurance-market