First time in the history of the Insurance Industry in India since the private players have entered in 2001, there has been a fall in the Insurance Penetration according to the annual report of the IRDA in 2011. The exact figure is yet to be finalized but the penetration has fallen from from $55.7 (Rs 3,063 approximately) in 2010 to $49 (Rs 2,695) in 2011. According to the IRDA Annual Report for 2011-12, there has been an increase every successive year from 2001.
The development of the Insurance Industry as a whole in the entire country is measured by Insurance Penetration and Insurance Density.
Insurance Penetration is measured as a % of Insurance Premiums to Gross Domestic Product whereas Insurance Density is calculated at a ratio of Insurance Premium to the total Population.
The annual report pointed out that the fall is mainly due to the fact that the life insurance sector saw a slowing in premium growth after the September 2010 regulations on unit – linked insurance policies. Insurance penetration slipped to 4.1% in 2011 as compared to 5.1% in 2010 after increasing time after time till 2009. This slip is on account of slower rate of growth in the life insurance premium as compared to the rate of growth of the Indian Economy.
The statistical analysis of the annual report showed that on the basis of total premium income, the proportion of the total sales of Life Insurance Corporation
improved slightly to 70.68% in 2011-12 from 69.77% corresponding period last year thereby reducing the market share of the private insurer from 30.23% in 2010-11 to 29.32% in 2011-12. In renewal premium, LIC continued to have a higher share at 69.91 % (70.48 % in 2010-11), compared to 30.09 % (29.52 % in 2010-11) for private companies.
The annual report showed a growth of 24.19% in the total premium underwritten by the non-life insurance industry. The total premium collected in the year 2011-12 is Rs. 52,876 crores as against Rs. 42,576 crores during the previous fiscal. In terms of underwriting losses, the report showed that the loss of non – life insurer companies was down to Rs. 8,817 crores in 2011-12 as against Rs. 9,944 crores for the year 2010-11. 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.
With third party motor pool being dismantled from April, insurers expect these losses to further even out in 2012-13. At the end of September 2012, there are 52 insurance companies operating in the country, out of which 24 are in life insurance business and 27 are in general insurance business. 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 introduced by the industry. Whereas the total paid-up capital of non-life insurers as on March 31, 2011 was Rs 6,706 crore
Thus, summarizing the above data, the I.R.D.A annual report stated that in contrast to other emerging market, life premium income fell sharply as premium volume contracted. ‘The introduction of stringent set of laws governing bancassurance in China and the distribution of unit-linked insurance products in India resulted in a sharp decline in new life premium growth’.