India to emerge as one of the fastest-growing insurance markets

Highlighting how India is poised to emerge as one of the fastest-growing insurance markets in the coming decade, Economic Survey 2022-23 has also sought to flag pitfalls associated with the customer preference for savings linked life insurance cover.

“Most life insurance products sold in India are savings-linked, with just a small protection component. Hence, households remain exposed to a significant financing gap in the event of the premature death of the primary breadwinner,” the Survey tabled in Parliament on Tuesday said.

It said this citing how insurance penetration in the country had increased steadily from 2.7% around the turn of the millennium to 4.2% in 2020. The life insurance penetration in 2021 was 3.2%, almost twice more than the emerging markets and slightly above the global average.

Important government interventions and a conducive regulatory environment in the country have contributed to the growth of the insurance market, which has seen increasing partnerships, product innovations, and vibrant distribution channels, the Survey said. The increasing outreach of the banking sector and capital markets is reflected in the insurance and pension sectors.

According to the Survey, insurance density in the country increased from $11.1 in 2001 to $91 in 2021. Total global insurance premiums in 2021 increased 3.4% in real terms, with the non-life insurance sector registering 2.6% growth, driven by rate hardening in commercial lines in developed markets.

In the life insurance segment, global premium growth bounced back strongly, registering an increase of 4.5%. The U.S. remained the largest insurance market in the world, with total premiums (non-life and life) of $2.8 trillion in 2021, followed by China and Japan. The Survey said with the conflict in Ukraine weighing on economic growth in Europe in particular, it is expected that insurance industry growth in emerging markets will outpace that in the developed markets this year, with emerging Asia in the lead.

Global life premiums are expected to contract a bit in 2022 after the previous year’s robust recovery from pandemic-induced lows. Saving premiums, however, are expected to decline due to volatility in the financial markets and as disposable incomes fall. Heightened risk awareness due to COVID-19 may continue to support demand for life and health insurance products, the Survey said.