At a time when insurance penetration is showing a downward trend, insurers can tap into new customer segments and stimulate growth by targeting tier 2 and 3 cities to increase penetration, according to the Economic Survey. 

The total premium grew by 7.7 per cent in FY24, reaching Rs 11.2 lakh crore, despite a slight decline in insurance penetration from 4 per cent in FY23 to 3.7 per cent in FY24. 

‘Innovative distribution models’

Life insurance penetration dropped marginally from 3 per cent in FY23 to 2.8 per cent in FY24, while non-life insurance penetration remained stable at 1 per cent. “With an overall insurance penetration rate of 3.7 per cent, below the global average of 7 per cent, there is a notable gap in coverage that presents opportunities for insurers to expand their reach,” the survey said. 

By targeting tier 2 and 3 cities and rural areas where awareness and accessibility are limited, insurers can tap into new customer segments and stimulate growth. Additionally, insurance density in India is relatively low compared to global standards. 

“Innovative distribution models can facilitate the inclusion of underinsured customers who are already covered by government schemes such as the Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Fasal Bima Yojana, and Pradhan Mantri Jan Arogya Yojana,” the survey suggested. 

The Swiss Re Institute has projected India’s insurance sector to grow at a rate of 11.1 per cent and is expected to become the fastest-growing market among the G20 nations over the next five years (2024-2028). 

An expanding middle class, technological advancements, and supportive regulatory measures will likely drive this growth.55 In the life insurance segment, there is a noticeable shift towards protection and guaranteed return savings products, which now cover 40 per cent of households, largely due to LIC’s extensive network.

“The non-life insurance sector is expected to double its premium-to GDP ratio over the next two decades. However, it will remain below the global average,” survey said.

The industry experts are also in agreement with the need to expand reach. “As macroeconomic factors such as inflation and income growth shape consumer behaviour, the demand for cost-effective and user-friendly insurance solutions is rising,” Hanut Mehta- CEO and Co-Founder of Bimapay Finsure told businessline.

“The future of insurance in India lies in accessibility, affordability, and innovation, making it imperative for insurers to adopt forward-thinking strategies that cater to the evolving needs of an increasingly digital and financially aware population,” he added.

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