Understanding Insurance Penetration


Two of the most important and mostly used terminologies in insurance industry throughout the globe are insurance penetration and insurance density. In fact, these two are also used to compare the insurance industry of various countries and plays an important parameter for judging the insurance growth in any economy. In this post, I will discuss about Insurance penetration and will try to a make readers understand about the same and will be discussing Insurance density in a separate post.

Insurance Penetration: Technically, Insurance Penetration is the ration of premium underwritten in a particular year to the Gross Domestic Product (GDP) of the country and is expressed as a percentage. In other words, insurance penetration is the percentage contribution of the insurance sector to the GDP of the country. Let us understand with an example. Suppose the total premium underwritten in a Financial Year in a country is INR 1,00,00,000 and the GDP of the country of that Financial Year is INR 50,00,00,000. To calculate the insurance penetration, divide the premium underwritten to the GDP which means, (1,00,00,000/50,00,00,000 = 0.02) and expressing this as a percentage will come up to 2% (0.02*100 = 2). This means, the insurance penetration is 2%. Insurance Penetration is widely used and you will encounter this jargon in almost every insurance journals, reports, research papers etc.

As per the latest Insurance Regulatory and Development Authority of India (IRDAI) Annual Report 2017-18, the insurance penetration of India in 2017 was 3.69% which is a slight increase from 3.49% in 2016. Further, the insurance penetration can be segregated in to life insurance and non-life insurance. As per IRDAI Annual Report, the life insurance penetration and non-life insurance penetration of India in 2017-18 were 2.76% and 0.93% respectively.  For 2016-17, life insurance penetration and non-life insurance penetration were 2.72% and 0.72% respectively. This indicates a marginal increase in life insurance and non-life insurance penetration from 2016-17 to 2017-18. Let’s look at the insurance penetration of some of the countries which is given in the following table:

Insurance Penetration of selected countries (in %)
Country Year 2016 Year 2017
Life Non-Life Total Life Non-Life Total
Taiwan 16.65 3.34 19.99 17.89 3.42 21.32
Hong Kong 16.2 1.41 17.6 14.58 3.36 17.94
South Africa 11.52 2.74 14.27 11.02 2.74 13.75
South Korea 7.37 4.72 12.08 6.56 5 11.57
United Kingdom (UK) 7.58 2.58 10.16 7.22 2.36 9.58
France 6.06 3.17 9.23 5.77 3.18 8.95
Japan 7.15 2.37 9.51 6.26 2.34 8.59
Switzerland 4.72 4.12 8.85 4.41 4.12 8.53
Singapore 5.48 1.67 7.15 6.64 1.58 8.23
India 2.72 0.77 3.49 2.76 0.93 3.69
World 3.47 2.81 6.28 3.33 2.8 6.13
Source: Swiss Re, Sigma volumes, 3/2017and 3/2018

A closure look at the insurance penetration reveals that India is way behind the world average insurance penetration.  Taiwan is the country with highest insurance penetration of 21.32 % followed by Hong Kong and South Africa having insurance penetration of 17.94% and 13.75% respectively. Also, the above table reveals that Switzerland is the country where the gap between life and non-life insurance penetration is minimum. In fact, Switzerland has a proper distribution of life and non-life insurance business and both life and non-life insurance has almost equal contribution to the country’s GDP.

Insurance penetration is an indicator of growth of insurance sector for any economy in a particular year. It is widely used as a comparative tool to measure and compare insurance industry among various countries and hence knowing and understanding of insurance penetration is beneficial for all of us. Hope I was able to make you understand this jargon in simple terms. 🙂

Ashish Kumar

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FEW QUOTES – IX


Quotations are very powerful and strong way to convey big and deep things in few lines. So here sharing few of my quotations which I hope will be liked by you. Writing quotations always gives me pleasure as it one of the few things which doesn’t take much time to write and read and at the same time has the capability to convey strong messages. Here I am sharing my 9th post of FEW QUOTES… series. Do read and share what is your views on these quotes of mine. 🙂

  • The most obscene thing mankind can do in his/her life is to break the trust. Its like a foul substance in the glass of clear water which makes water unsuitable to drink.                                                                                                              
  • Its easy to commit the mistakes but it requires courage to rectify the same.
  •  There are two types of knowledge – bookish knowledge and behavioural knowledge. Its difficult to find both at the same time. Having the combination of both makes one unique, different and perfect.

– Ashish Kumar

…KNOWLEDGE…


We all are familiar with this word. We always use this word in our day to day life. I don’t think that there is any day when we don’t use or come across this word. This word “knowledge” is of utmost importance in everyone’s life.  We also use this word in sarcastic manner whenever required. We also tease others sometimes with a joke or in serious manner that “how much knowledge do you posses???”  When we say like this or ask such type of questions to others do we ever realize what knowledge do we posses? Do we have the right to judge others on the basis of their knowledge? Do we know everything? Or we are having so much over confidence that we always try to demoralize others by throwing such kind of questions???

 

   Before i go to answer the above raised questions let me put one more question in line.

       WHAT IS A KNOWLEDGE?

How many know the answer to this question? I know this is one of the shit question being asked by someone or this might be the worst question to many of us.  But this question cannot be ignored. We should find the answer to this question. Are we really a knowledgeable person? I will not throw any more question as of now because i have already bombarded many questions.

 

So let me come to the point now. What is a knowledge. Is knowledge means reading thick books only. Or memorizing all the topics like a parrot and score good marks in the exam.  Or knowledge means understanding each and every topic thoroughly  and implement  it according to the needs and requirement. If i say that this person is very knowledgeable then within a fraction of second his/her image is generated in our mind and our perception starts accordingly. We start thinking in one direction. The picture comes that he is the most intellectual person of this world.

Here comes our fault… When we say that he is a knowledgeable person then we always perceive in one direction and that direction is knowledge related to books or “bookish knowledge”.

In my opinion there are two kinds of knowledge. They are:

1. Bookish knowledge
2. Behavioral knowledge

We all are familiar  with bookish knowledge and most of us is having bookish knowledge. But do we have behavioral knowledge.   Yes  most of us are having bookish knowledge but  when it comes to behavioral  knowledge , i am sorry to say the  count is very few.  

knowledge2

In this fast moving world we are able to gain bookish knowledge and there is no problem in it. I am not criticizing the bookish knowledge which is a must requirement  to survive. We must have the knowledge related to our fields but at the same time we are forgetting our behavior or behavioral knowledge.   When it comes to behavior it is very difficult to find a person having proper behavior.

 

In the present world the number of knowledgeable person is increasing but at the same time the number of behavioral person is diminishing. There might be some reason why the behavior is getting degraded day by day. One of the reason may be the greed  to get everything even though we didn’t deserve to have it. That greed may degrade the behavior.  Other reason may be the lack of healthy competition now a days. People use foul practices in order to defeat their competitors which definitely affect their behaviors. One of the most important or i can say root cause of lack of behavior is “lack of satisfaction”. No one is satisfied now a days and that leads to unfair activities being done by them which ultimately leads to the degradation of their behavior.  

knowledge3

Let me give few examples where lack of behavior is being observed.

   Suppose your friend needs your help. He/she might be in trouble and needs you. You helped him when he required. But after that there is a sudden change in his behavior. He has stopped talking to you suddenly without letting you know the reason for the same. At that time you will really  feel bad  and you will definitely think for sometime that what went wrong. Here comes the behavioral picture of a person. It didn’t costs anything to talk to that person who helped you when you were in vain. But it happens as we all know because nobody knows when and where there will be a U-turn in the behavior of a person. This is one of the biggest drawback of any person to take a U-turn anonymously which should not happen .

 

  This is one of the simple example i have given. There are many more. I am sure you all might have come across the situation where the behavior of person have hurt you. Life is such full of twists and turns.

If the behavior of a person is good then he will be happy and can lead a good life. I agree good behavior cannot decide how much sum of money will you earn in your life but its also true that your behavior decides who will stay in your life. 

 

As i mentioned above the two kinds of knowledge : Bookish and Behavioral. 

Having only bookish knowledge can make your career bright and you can earn many thing.

Having only behavioral knowledge  but no bookish knowledge  can make people available for you or you can have people surrounding you.

But having the combination of both bookish and behavioral knowledge is an optimum one which will make you a “good human being” and becoming a good human being is the toughest task… 

knowledge4

– Ashish Kumar