Data Spotlight: Low Insurance Density in India

There are a number of data points to look at while considering an investment in insurance sector. Insurance Density is one of them – I recently came across the term while reading the Economic Survey 2023-24

Insurance density is a crucial metric that measures the average amount of insurance premium paid per person in a country, calculated by dividing the total insurance premium by the population.

– A higher insurance density often correlates with a higher per capita income, suggesting a more developed economy.
– It reflects the purchasing power and risk awareness of the population.
– It also indicates access to financial products, the higher the density, the more the access to viable financial products by citizens

India’s insurance density, while growing, still lags behind global benchmarks, particularly when compared to developed economies. This gap underscores the significant untapped potential within the Indian insurance market.

– The insurance density in India is at 95$ (last calculated at the end of FY23).
– Sectorwise, life insurance density is at 70$ while non-life insurance density is 25$. These have increased slightly from the numbers at the end of FY22, where the overall insurance density was at 92$, non-life insurance at 22$ and life insurance didn’t show any change
– Globally, the insurance density is 361$ for the life segment and 528$ for the non- life segment. Overall, insurance density is at 889$
– Within Asia, India lags behind all major & emerging economies (as seen in the table below). For benchmark purposes, lets take China as an example, whose insurance density is at 508$, 274$ for life segment & 234$ for non-life

Takeaways for investors, insurers & startups

– There is a lot of room for expansion in the insurance sector, and entry for new players, in distribution & product development
– Access to viable financial products is missing, and is the need of the hour
– Opportunity to develop insurance products tailored to the specific needs and affordability of the Indian market

By closely monitoring insurance density trends, startups and VCs can make more informed decisions about market entry, product development, and investment strategies.