Insurance density falls for first time in India: IRDA

The Insurance Regulatory and Development Authority (IRDA) said that since opening up of Indian insurance sector for private participation, India has reported a fall in the insurance density for the first time in the year 2011. The figure fell to $49 (about Rs 2,695) in 2011, from $55.7 (about Rs 3,063) in 2010.

According to the IRDA Annual Report for 2011-12, there was an increase in insurance density for every subsequent year from 2001.

The measure of insurance penetration and density reflects the level of development of insurance sector in a country. While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium to population (per capita premium).

“Since opening up of Indian insurance sector for private participation, India has reported increase in insurance density for every subsequent year and for the first time reported a fall in the year 2011,” said IRDA in its annual report. This is mainly due to the fact that life insurance sector has witnessed a slowdown in premium growth, post the September 2010 unit-linked (Ulip) policy regulations.

Similarly, insurance penetration, which surged consistently till 2009, slipped in the consecutive second year and stood at 4.1% in 2011, compared to 5.1% in 2010. This has been attributed to slower rate of growth in the life insurance premium as compared to the rate of growth of the Indian economy.

In comparison to other emerging markets, life premium income fell sharply as premium volume shrank in China and India. “The introduction of tighter regulations governing bancassurance in China and the distribution of unit-linked insurance products in India resulted in a sharp fall in new life premium growth,” said IRDA in the annual report.

The annual report further showed that on the basis of total premium income, the market share of India’s largest insurer Life Insurance Corporation (LIC) increased marginally from 69.77% in 2010-11 to 70.68% in 2011-12. The market share of private insurers has gone down marginally from 30.23% in 2010-11 to 29.32%.

Similarly, in renewal premium, LIC continued to have a higher share at 69.91% (70.48% in 2010-11) when compared to 30.09% (29.52% in 2010-11). The total capital of the life insurance companies as on March 31, 2012 was Rs 24,932 crore. During 2011-12, an additional capital of Rs 1,270 crore was brought in by the industry.

According to the report, the non-life insurance industry underwrote total premium of Rs 52,876 crore in India for the year 2011-12, as against Rs 42,576 crore in 2010-11, registering a growth of 24.19%.

The premium underwritten by 15 private sector insurers (other than the insurers carrying on exclusively health insurance business) in 2011-12 was Rs 22,315 crore as against Rs 17,425 crore in 2010-11. The total paid-up capital of non-life insurers as on March 31, 2011 was Rs 6,706 crore, the report further showed.

In terms of the underwriting losses, the report showed that losses of non-life insurance companies decreased to Rs 8,817 crore in 2011-12, from Rs 9,944 crore in the previous year. With third party motor pool being dismantled from April, insurers expect these losses to further even out in 2012-13.

At the end-September 2012, there are 52 insurance companies operating in India; of which 24 are in the life insurance business and 27 are in general insurance business. In addition, GIC is the sole national reinsurer.

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