The government’s policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes are expected to catapult this key ratio beyond 4 per cent mark by the end of this year, reveals an ASSOCHAM study.
Despite the gentle rise in insurance penetration, which is percentage of insurance premium with reference to the gross domestic product (GDP), it is still far below the global average, says the paper titled ‘Insurance penetration in India.’
That insurance penetration has started its northward journey is evident from the fact that it has increased from 3.3 per cent in 2014 to 3.44 per cent in 2015 on the back of various insurance schemes launched by the government.
As part of social security initiative, the government has launched low premium insurance schemes both life and non-life in 2015. Last year it introduced crop insurance.
With an objective to provide insurance cover to all, the government launched Pradhan Mantri Suraksha Bima Yojna (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) in 2015, noted the study.
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PMSBY offers a renewable one-year accidental death-cum-disability cover of Rs 2 lakh for partial/permanent disability to all savings bank account holders in the age group of 18-70 years for a premium of Rs 12 per annum per subscriber. The scheme is managed by general insurance firms.
PMJJBY, on the other hand, offers a renewable one year life cover of Rs 2 lakh to all savings bank account holders in the age group of 18-50 years, covering death due to any reason, for a premium of Rs 330 per annum per subscriber.
Besides, Pradhan Mantri Fasal Bima Yojana (PMFBY) launched last year to provide financial support to farmers suffering crop loss or damage arising out of unforeseen events will also add to insurance penetration.
PMFBY has been approved for implementation in all States and Union Territories from Kharif 2016 season in place of National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS).
“PMFBY is a significant improvement over the earlier schemes on several counts and comprehensive risk coverage from pre-sowing to post-harvest losses are some of the salient points. A budget provision of Rs 5501.15 crore has been made for the scheme for the current crop season,” ASSOCHAM President Sandeep Jajodia said.
Rashtriya Swasthya Bima Yojana (RSBY) is a government-run health insurance scheme that provides for cashless insurance for hospitalisation in public as well as private hospitals. The scheme is force since April 1, 2008 and has been implemented in 25 states.
The number of lives covered under health insurance policies during 2015-16 was 36 crore, which is approximately 30 per cent of India’s total population. The number has seen an increase every subsequent year as 28.80 crore people had the policy in the previous fiscal.
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The measure of insurance penetration and insurance density calculated as the ratio of premium to population or per capita premium reflects the level of development of insurance sector in a country, said the ASSOCHAM President.
During the first decade of insurance sector liberalization, the sector has reported consistent increase in insurance penetration from 2.71 per cent in 2001 to 5.20 per cent in 2009.
However, since then, the level of penetration has been volatile and remained below the peak. It declined from 3.9 to 3.3 per cent in 2014 due to certain regulatory changes and unfavourable market conditions.
This trend was observed in the level of insurance density which reached the maximum of USD 64.4 in the year 2010 from the level of USD 11.5 in 2001. During 2015, the insurance density moderated to USD 54.7. The insurance density of life insurance business had gone up from USD 9.1 in 2001 to reach the peak at USD 55.7 in 2010 and declined to USD 43.2 in 2015.
The life insurance penetration surged from 2.15 per cent in 2001 to 4.60 per cent in 2009. Since then, it has exhibited a declining trend reaching 2.6 per cent in 2014.
However, there was a slight increase reaching 2.72 per cent in 2015 when compared to 2.6 per cent in 2014. The insurance penetration for the insurance sector as a whole in 2015 was 3.4 per cent in India, as against world average of 6.2 per cent.