India’s insurance penetration at just 3.76% of the GDP is “extremely low” against comparable Asian countries such as China, Malaysia and Thailand as well as the global average, according to the central government’s Economic Survey of 2020-21 released on Friday. Even as India’s insurance penetration grew from 2.71% in 2001 to 3.76% in 2019, when compared with the penetration recorded in comparable Asian economies such as Malaysia, Thailand and China at 4.72, 4.99 and 4.30 % respectively, was found to be much lower, the survey stated.

Both, India's life and non-life insurance penetration in 2019 at 2.82% and 0.94% respectively are also significantly lower than the global average of 3.35% and 3.88%, respectively. Calculated as the percentage of total insurance premium to Gross Domestic Product (GDP), insurance penetration is an indicator to assess the performance and potential of the insurance sector in a country.

“India has extremely low insurance penetration as compared to global average and other comparable countries,” stated the annual Economic Survey ahead of the crucial Union Budget on Monday. “Although the penetration is lower in India for both, it is particularly low for non-life insurance as compared to other countries,” it added. Non-life insurance includes segments such as health, motor, farm and fire insurance among other such categories.

Similarly, insurance density, which is calculated as the ratio of insurance premium to population as an indicator of insurance sector performance, at just $78 in 2019 has been noted as dismal for India against comparable Asian countries and the global average, the survey said as well.

For Malaysia, Thailand and China in 2019 insurance density were much higher at US$ 536, US$ 389 and US$ 430 respectively.

“Density for life insurance is US$ 58 and non-life insurance is much lower at US$ 19 in 2019 in India. Globally insurance density was US$ 379 for the life segment and US$ 439 for the non-life segment respectively in 2019,” according to the survey.

During FY20, the gross direct premium (GDPI) of non-life insurers in India grew by 11.45% to Rs 1.89 lakh crore, as against Rs 1.69 lakh crore in 2018-19. Meanwhile, in this period the GDPI of life insurance sector grew by 12.75% to Rs 5.73 lakh crore in 2019-20, as against Rs 5.08 lakh crore in FY19.

The low penetration and density of insurance in India has brought to stark notice the need to improve coverage for better access to healthcare and financial security for Indians. The matter has assumed even more urgency since the onset of the coronavirus pandemic which has infected over 1 crore Indians and led to 1.5 lakh deaths.

The pandemic-stricken year, however, saw key regulatory changes in India’s insurance landscape such as introduction of paperless KYC for digital on boarding of policyholders, new standard terms for life and health insurance, and the regulator IRDAI allowing insurers to sell short-term coronavirus-specific health indemnity covers.