Public sector general insurers saw the highest claims ratio of 103.17 per cent, while private sector general insurers had the lowest claims ratio of 77.95 per cent during the year 2021-22.
Overall though, insurance penetration in India in 2021-22 remained unchanged at 4.2 per cent, as in the previous year, despite rising premiums, according to the Insurance Regulatory Development Authority (Irdai ) annual report 2021-2022.
Insurance penetration is a metric often used in the insurance industry to assess the level of development of the insurance sector in a country. It is measured as the percentage of insurance premium to gross domestic product (GDP ).
Says Naval Goel, founder and CEO, PolicyX.com: “Penetration remained unchanged even though premiums have increased by about 10 per cent in life and about 11 per cent in general insurance because of the fact that penetration is measured as a percentage of premium by GDP. If there is an equal increase in GDP, then this ratio remains the same. This basically means that the insurance industry has grown at the same pace as GDP growth.”
During the first decade of liberalisation of the insurance sector, there was a reported increase in insurance penetration from 2.71 per cent in 2001-02 to 5.2 per cent in 2009-10, according to the IRDAI annual report.
“Since then, the level of insurance penetration declined till 2014-15 due to decline in life insurance penetration. However, insurance penetration again started increasing from 2015-16 and reached 4.20 per cent in 2021-22. While the penetration of life insurance sector has gone up from 2.15 per cent in 2001-02 to 3.2 per cent in 2021-22, non-life insurance penetration has gone up from 0.56 per cent to 1.0 per cent during the same period,” says the annual report.
Insurance density is used to assess the level of development of the insurance sector in a country. It is calculated as the ratio of premium to population (per capital premium).
Insurance density in India increased from $78 in 2020-21 to $91 in 2021-22, according to the Irdai annual report. The level of insurance density has reported consistent increase from $11.5 in 2001-02 to $64.4 in 2010-11. After some ups and downs, insurance density recorded steady increase from the year 2016-17. While life insurance density has gone up from $9.1 in 2001-02 to $69 in 2021-22, non-life insurance density has gone up from $2.4 to $22 during the same period.
According to a Swiss Re Sigma report, globally, insurance penetration and density were three per cent and $382 respectively for the life segment, and 3.9 per cent and $492, respectively for the non-life segment in 2021. Overall, insurance penetration and density were seven per cent and $874 respectively in 2021.
Claims Ratio Of General And Health Insurers
The incurred claims ratio (net incurred claims to net earned premium ) of the general insurance industry was 89.08 per cent during 2021-22 against 81.06 per cent of previous year, according to the annual report. The net incurred claims of the general insurers stood at Rs 1.41 lakh crore in 2021-22 as against Rs 1.12 lakh crore in 2020-21, an increase of about 26 per cent during 2021-22.
Public sector general insurers experienced the highest claims ratio of 103.17 per cent, whereas private sector general insurers had the lowest claims ratio of 77.95 per cent during the year 2021-22. Among the various segments, health segment had the highest claims ratio at 105.68 per cent against a claim ratio of 89.51 per cent during previous year.
“Health had higher claims than last year due to Covid-19 as well as other factors, such as increase in coverage by most insurers. Typically, the health segment should have a claims ratio of 65-70 per cent for healthy portfolio. For the last two years, there has been a jump due to Covid-19 and coverage increase,” says Goel.