The Department of Financial Services (DFS) and the Insurance Regulatory and Development Authority of India (IRDAI) should set specific, time-bound targets to increase insurance penetration, a Parliamentary Committee has recommended, citing India’s insurance penetration of 3.7% of GDP, nearly half the global average.
The Committee on Public Undertakings (CoPU), chaired by BJP Member of Parliament Baijayant Jay Panda, noted in its report that although India has become the 10th largest insurance market globally with premium volume of $136 billion and is projected to become the 6th largest by 2032, insurance penetration remains at 3.7% of GDP, compared with the global average of 7%. Insurance density stands at USD 95 per capita against the global average of USD 889.
“The Committee recommends that DFS and IRDAI set specific, time-bound targets for increasing both life and non-life penetration, with annual milestones published transparently so that progress can be tracked,” the report said. It added that these targets should be disaggregated by geography, demographic segment and line of business to enable focused policy interventions.
The panel stressed that insurance penetration should not be measured only through premium-to-GDP ratios but also by “the extent of meaningful financial protection available to households, farmers, workers, small businesses and vulnerable sections of society.” It observed that non-life insurance penetration at 1% of GDP remains far below the global average of 4.2%, indicating a “substantial coverage differential.”
On taxation, the Committee recommended that the GST Council examine the issue on priority, keeping in view the objectives of affordability, financial inclusion and “Insurance for All by 2047.”
Raising concerns over the financial condition of public sector general insurers, it noted that National Insurance Company Ltd (NICL), Oriental Insurance Company Ltd (OICL) and United India Insurance Company Ltd (UIICL) continue to have negative solvency ratios, despite government capital infusions of Rs 17,450 crore between 2019-20 and 2021-22.
Collectively, the four public sector general insurers recorded underwriting losses of about Rs 96,861 crore between FY2019-20 and FY2023-24.
The Committee recommended that “DFS and IRDAI collaboratively oversee Board-approved solvency restoration plans for each PSGIC, featuring specific quarterly milestones and independent review.” It further urged that the government present within six months a comprehensive solvency restoration status report for the three insurers with negative solvency, detailing business mix changes, profitability targets and technology investments to achieve the regulatory minimum solvency ratio of 1.50.
Highlighting governance concerns, the Committee instructed DFS to prioritise the appointment of Independent Directors across all Insurance CPSUs, mandating the fulfilment of all pending appointments within a strict six-month timeframe.
The panel also recommended that Motor Third Party premium rates be revised to actuarially sound levels and that IRDAI develop a standardised hospital pricing framework for cashless health insurance claims to improve cost control.