According to the IRDAI Annual Report 2022-23, the total Insurance Penetration (Life + Non-Life) in India dropped from 4.2% in 2021-22 to 4% in 2022-23. Even more shocking is that the IRDAI Annual Report 2023-24 shows it has fallen further to 3.7% from 4% in 2022-23.
Another shocker is the Non-Life Insurance Penetration. Though it has been consistently at the same level for the past couple of years, it is only 1%!
The most important of insurances, Life Insurance Penetration, as per the IRDAI Annual Report 2023-24, stands at only 2.8%.
We saw a substantial increase in Insurance Penetration between 2014 and 2020, but from 2021, there has been a noticeable decrease.
Key Reasons for Low Insurance Penetration in India
Lack of Awareness
The majority of people in India don’t realize the importance of insurance until something goes wrong. Insurance is often seen as an expense instead of a safety net.
For example:
Some people earning ₹1 lakh may have Life Insurance worth only ₹5 lakhs—far below what they actually need.
For Non-Life Insurance (like fire, burglary, or personal accident policies), the situation is even worse. People often ignore these policies until they face financial losses.
Health Insurance, while improving in popularity, is often underutilized. Many people buy low-coverage policies or skip health insurance altogether.
Social Taboo
Talking about Life Insurance can feel uncomfortable because it involves discussing topics like death and money. For many families, these conversations are avoided, especially in social settings.
Perception That Insurance Is Expensive
Many people think insurance is a luxury they can’t afford. However, this isn’t true:
Fire Insurance premiums, for example, are as low as ₹1.5 per ₹1,000 of coverage.
Life and General Insurance premiums are also small compared to the financial losses they can protect against.
Too Many Options
India has 24 Life Insurance Companies and 256 types of General Insurance Products, making it confusing to choose the right product. People often wonder:
“Which company should I pick?”
“What product suits my needs?”
The best approach is to pick products based on your financial goals, family size, expenses, and lifestyle. This is where the guidance of a Trusted Financial Advisor becomes important.
Lack of Trust in Advisors
India has over 25 lakh Insurance Agents, brokers, and financial institutions. Unfortunately, mis-selling is a big problem.
The Economic Survey 2024 by Chief Economic Advisor V. Anantha Nageswaran highlighted this issue. Former IRDAI Chairperson Subhash Chandra Khuntia also stressed the need for stronger rules to stop banks from mis-selling policies under Bancassurance Models.
While advisors earn commissions, their focus should always be on building trust and serving the client’s best interests to create long-term relationships.
As India grows economically, improving Financial Literacy is essential. Knowing the right Insurance Products can help individuals protect their families, assets, and savings while staying ahead of inflation.
For reliable advice and a complete financial plan, reach out to us today!
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