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Pie of under insured people in India rises
Jun 25, 2015


Insurance is a key aspect of financial planning. However, Indians seem to be ignorant when it comes to hedging themselves against mortality risk. As seen in today's chart, insurance penetration in India has been on a constant decline over the last 5 years. Insurance penetration ratio is measured as a percentage of premiums collected to a country's GDP. While this gives a reasonable indication of a country's insurance penetration rate it is slightly flawed. For instance, a rise in GDP with no corresponding rise in premiums will artificially lower the penetration rate.

For an accurate measure of the penetration rate one should effectively see the proportion of people insured as a percentage of total population of that country. Also, when aggregating total population, children and senior citizens should be excluded as in most cases they are either not eligible for or do not need insurance.

Nonetheless, globally, insurance penetration figure stands at about 6.2%. This is considerably higher than the 3.3% figure witnessed in India during FY15 reflecting that Indians are grossly under-insured. Another interesting factor is that in India the growth in non-life premiums is higher than life premiums.

It is believed that with lesser disposable income insurance penetration has come down. Another reason for low penetration is lack of awareness and poor channel network. Bancassurance is one means through which channel network can be improved. It may also create awareness amongst people.

Data Source: Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - Is process as important to trading as in investing?

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