The government came out with its latest economic survey on January 31, 2023. Economic Survey 2022-23 also gave an outlook of the life insurance sector across India over the past year.
According to the survey, insurance penetration in India has increased steadily from 2.7 per cent around the turn of the millennium to 4.2 per cent in 2020 and has remained the same in 2021. Life insurance penetration in India was 3.2 per cent in 2021, almost twice more than the emerging markets and slightly above the global average.
That said, most life insurance products sold in India were savings-linked, with just a small protection component. As such, households remained exposed to a significant financing gap in the event of the premature death of the primary breadwinner, the survey said.
The survey also highlighted the buying habit of life insurance products in India. Most Indians bought them as an investment for future savings, rather than for protection.
According to the survey, life insurance density in India increased from US$ 11.1 in 2001 to US$ 91 in 2021 (density for Life insurance was US$ 69 in 2021) in keeping with the relatively faster expansion of the insurance market in the country.
That said, the US remained the largest insurance market in the world, with total premiums (non-life and life) of US$ 2.8 trillion in 2021, followed by China and Japan. Globally, premium growth also bounced back strongly, registering an increase of 4.5 per cent, the survey said.
Pradhan Mantri Jeevan Jyoti Bima Yojana, which provides for risk coverage of Rs. 2 Lakh, which is credited to the savings bank account of the holder in case of the death of the insured has been popular in insurance penetration in the rural hinterland, the survey said. Since its inception, 144 million beneficiaries have been enrolled under the scheme, and 630,000 claims have been disbursed as of November 30, 2022.
The survey further said that global life premiums are expected to contract slightly after the robust recovery from pandemic-induced lows driven by inflationary pressures, economic uncertainty, and monetary tightening.
“Saving premiums are expected to decline due to volatility in the financial markets and as disposable incomes fall, but heightened risk awareness due to Covid-19 may continue to support demand for life protection (and health) insurance products,” the survey said.