Revisiting Insurance Penetration and Insurance Density in India: An Analysis

Abstract

Insurance penetration and insurance density are two prominent measures of the assessment of overall progress in the insurance sector of any country of the world. Indian insurance industry has been remained backward and underdeveloped for a long time due to many inherent reasons. Indian insurance industry was exclusively controlled by private players during the pre-independence era. Government took over the control of insurance sector from the private players after the independence of India. Indian insurance sector remained under the exclusive control of government for a long time until the introduction of the Insurance Regulatory and Development Authority of India [IRDAI] in 1999. The establishment of the IRDAI was recommended by Malhotra Committee with the prime objective of making Indian insurance industry competitive, dynamic, accessible and inclusive. The IRDAI came into the existence in 2000 that paved the way for the introduction of private players into the Indian insurance sector. Thus, India has witnessed a 360 degree change in the insurance sector. Nationalization and privatization process of Indian insurance sector was primarily driven by the betterment and wellbeing of the mass. Indian insurance industry has observed a significant improvement in the sector during the post IRDAI period. However, Indian insurance sector could not optimally harness its underlying opportunities due to numerous explicit and implicit factors. The COVID-19 pandemic has played a charismatic role in the expansion of insurance outreach in India. But the current scenario of insurance penetration and density in India is not up to the mark. This scenario of Indian insurance industry implies immense growth potential in the sector ahead.