What is the life insurance penetration in India and how does it compare globally?

Oct 10, 2019 | 1 month ago | Read Time: 3 minutes | By iKnowledge Team

Seema recently lost her husband. With four young children to feed, no help from her in-laws who were pressuring her to vacate her husband’s house, she tried to make ends meet through odd jobs. She couldn’t take up any full-time employment as her two youngest children were too young to be left alone and were at the stage where they still had to be taken care of. Her husband had been a taxi driver and earning modestly but still adequately to take care of them.

When her friend asked her if her husband had ever taken a life insurance policy. Regrettably, the answer to this question was a no. She is not alone in this. While there are people who are not insured, there are those who have even bought life insurance policies, yet are not adequately insured. If the main earning member dies, the sum assured would be insufficient to maintain the surviving family members.

Life insurance penetration in India is rather low. It is calculated as the ratio of the premium to the GDP (gross domestic product). The latest figures from the insurance regulator show the comparison of the insurance penetration in India visa-vis other countries and the world average. As we can see (from the figure below), insurance penetration has fallen from 2013 to 2016.

Why is Insurance Penetration Low in India?

The low levels of awareness, low levels of financial literacy, inadequate income levels are all cogent reasons for the lack of life insurance penetration and the fact that it is not available to those who need it the most.

Life Insurance, which should ideally be a demand-led product, has remained as a push product, with agents and companies soliciting business rather than the other way around. This is most likely due to poor awareness even among the educated class. People have to be taught the basics of what a life insurance policy is.

A former member of IRDAI, H. Ansari, who last year co-authored a report called “A Transformative agenda for the Indian insurance industry and its policy framework,” stated[1] that the sector needed some regulatory relaxations in terms of raising capital and compliance requirements while insurance companies could be encouraged to adopt development oriented policies. More thought would have to go into the pricing and promotion of the products, he added.

Most companies and their vast network of agents target the affluent, urban, salaried class and often end up selling different products to the same constituency. Agents follow commissions and it is obvious that this is a major motive in how and where products are sold.

Life Insurance Penetration in the world: The following table illustrates the Life Insurance Penetration throughout the world:


Rise in Insurance Density

One piece of good news is that the insurance density, which is the ratio of premium to the total population and expressed in US Dollars, has risen from $41[2] in 2013 (for the life insurance sector) to $46.5[3] in 2017. However, this ratio is far lower than what is seen globally, the world average being upwards of $300[4].

As mentioned earlier, the problem is not only with under penetration but also inadequate penetration. Most individuals have life covers of barely Rs 1 lakh sum assured or they may have several covers for low sums which cumulatively may not add up to much. Somehow there do not seem to be many initiatives on awareness in the sector with agents being the only customer interface most of the time.

With the industry becoming more customer friendly and cost effective, India’s insurance penetration is likely to keep increasing over the next few decades, helping protect India’s population through thick and thin. To know about Aegon Life’s insurance products like term insurance and other products, visit our home page.


[1] https://timesofindia.indiatimes.com/business/india-business/insurance-sector-needs-comprehensive-over-haul-report/articleshow/59511859.cms

[2] HANDBOOK ON INDIAN INSURANCE STATISTICS 2016-17; https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3472&flag=1

[3] HANDBOOK ON INDIAN INSURANCE STATISTICS 2016-17; https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3472&flag=1

[4] HANDBOOK ON INDIAN INSURANCE STATISTICS 2016-17; https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3472&flag=1

Calculate premium for your Term Plan

Understanding Disgrace Insurance What is disgrace insurance?
Life Insurance Penetration in India & the World Explained
What are robo advisors in insurance and can they change the game?
Date of Birth
Annual Income
Sum Assured
Select Cover Upto Age
Full Name
Email ID
Your Monthly Premium for Aegon Life iTerm Insurance Plan


  • Oct 10, 2019
  • |
  • Read Time: 3 minutes

Section 80C, 80CCC & 80CCD Tax Deductions Explained

  • Oct 10, 2019
  • |
  • Read Time: 3 minutes

Tax Structure in India, Explained