1st Prize Winner – Shri Devaraj Belke Mahadeva, NIA, Pune
INCREASING INSURANCE PENETRATION IN INDIA
Insurance as an industry has secured a vital position in the development of the nation’s economy. An
efficient insurance market is essential to achieve integration into the global economy and sustainable
strong economic growth. In conjunction with the forces of global consolidation, current advances in
information technology and the potential of e-business mark the beginning of a veritable efficiency
revolution in the insurance industry.
One of insurance's key roles is safeguarding the financial health of small and medium-sized enterprises.
In addition to the protection provided by ...view middle of the document...
For companies wanting to address this
opportunity, a “Even me” approach will prove insufficient. To emerge as winners, they must re-examine
their strategies and commit to a few bold, breakthrough approaches. This will not only put them in pole
position in the race for customers, but will also help them build sustainable and profitable businesses.
India’s life insurance market has grown rapidly over the past six years, with new business premiums
growing at over 40 per cent per year. This impressive growth has been driven by liberalisation of the
sector, that enabled the entry of a host of new players with significant growth aspirations and capital
commitments. These players have contributed to the sector’s development by significantly enhancing
product awareness, promoting consumer education and information, and creating more organised
In urban areas, penetration of life insurance in the mass market is about 65 per cent, and it is
considerably less in the low-income unbanked segment. In rural areas, life insurance penetration in the
banked segment is estimated to be about 40 per cent, while it is marginal at best in the unbanked
segment. This will change as India sees strongly accelerating household income and a more favourable
demographic profile over the next two decades. This will accelerate insurance penetration and per
Adding to the growth driven by sheer economics is the demand for long-term savings and investment
products—a gap met by insurance for the Indian consumer. Consumers rank life insurance higher than
other investment options because of its ease and convenience in investing, tax benefits, and protection.
Among all financial products in India, life insurance enjoys the highest popularity and demand. Contrary
to the conventional directly correlated risk–return relationship, Indian consumers perceive life insurance
as a low-risk and high-return investment—a perception driven by high awareness of the Life Insurance
Corporation of India (LIC) and its record of delivering stable returns over the years.
Multiple Markets Emerging, Needing Distinct Approaches
We can anticipate new distinct consumer segments with different needs, the rising importance of
significantly wider reach, and competitive dynamics such as the emergence of new business models
from some competitors changing the game. new distinct consumer segments due to dramatic
Rising income levels and dramatic demographic shifts will lead to the emergence of distinct consumer
segments that need to be served in fundamentally different ways. Consuming classes are likely to
emerge by 2012: „
Rising affluent. The affluent “globals” (annual household income greater than Rs. 10 lakh) will be
2.3 million households strong by the end of 2012 and will earn almost 12 per cent of the
country’s aggregate disposable income. Going forward to 2025, this segment will swell to 9.5