Only a marginal rise in non-life insurance penetration, says Lloyd’s report
India’s non-life insurance penetration has risen marginally to 0.9 per cent of the GDP on the back of government schemes, but the country continues to have one of the highest underinsurance levels globally, according to a new report by Lloyd’s.
India’s insurance penetration stood at 0.7 per cent of the GDP in 2012. “India has one of the world’s biggest insurance gaps at 1 per cent of its GDP, or $ 27 billion, which represents an increase from $19.7 billion in 2012,” said the Lloyd’s Underinsurance Report 2018, which was launched on Monday.
It added that India’s insurance gap accounts for 17 per cent of the total global insurance gap.
Globally, India has the seventh-largest insurance gap, with the top spot held by Bangladesh. However, in absolute terms, China has the biggest insurance gap of $ 76.4 billion, followed by India and Indonesia ($ 14.6 billion).
At the other end of the spectrum, the Netherlands remains the country with the highest insurance penetration at 7.7 per cent, followed by South Korea, which has an insurance penetration of 5 per cent of its GDP.
“The global underinsurance gap is now $162.5 billion, a reduction of just over 3 per cent over a period of six years from $168 billion in 2012,” said the report, which was compiled along with the Centre for Economic and Business Research.
Among Asian countries, China has an insurance penetration at 1.9 per cent, followed by Vietnam with at 0.8 per cent, Philippines at 0.6 per cent, and Indonesia at 0.5 per cent.
The report has also found that India, along with Bangladesh, Vietnam, Philippines and Indonesia, are among the countries most exposed to risks of natural disasters such as climate change, and yet are the countries that are least able to fund recovery efforts.
“Each of these countries has an insurance penetration rate of less than 1 per cent,” it noted.
Lack of trust
The report notes that aside from affordability, which is a major barrier to adoption in emerging economies, people also choose not to buy insurance due to little understanding about the value and a lack of trust in insurance companies.