India’s Insurance Penetration Stagnates at 3.7% for FY25

India’s insurance penetration reportedly stood at 3.7% in 2024-25, unchanged from the previous financial year, as per Business Standard report. This indicates that insurance premiums, when compared with the size of the economy, did not record any increase during the year. 

Insurance penetration is calculated as the ratio of total insurance premiums to gross domestic product (GDP). The flat reading shows that premium growth broadly kept pace with economic growth. 

Life Insurance Penetration Edges Lower 

The life insurance segment recorded a marginal decline, with penetration falling to 2.7% in 2024-25 from 2.8% a year earlier. Life insurance continues to contribute to the larger share of total insurance premiums, despite the slight reduction in its GDP ratio. 

In contrast, non-life insurance penetration remained unchanged at 1%. This segment includes health, motor, crop and other general insurance products and showed no variation from the previous year. 

Insurance Density Shows Modest Rise 

Insurance density, which reflects per capita premium spending, increased slightly during the year. Overall insurance density rose from $95 in 2023-24 to $97 in 2024-25. 

Life insurance density increased from $70 to $72, while non-life insurance density remained stable at $25. The rise in overall density points to a small increase in average insurance spending per individual. 

Long-term Trend in Per Capita Premiums 

The increase in insurance density continues a gradual trend observed since 2016-17. Over this period, per capita insurance spending has moved up steadily, even as penetration levels have shown limited movement. 

Insurance density is calculated by dividing total premiums by the population and is commonly used to track changes in average spending on insurance products. 

How Penetration and Density Differ 

Insurance penetration and insurance density are two standard measures used to assess the insurance sector. Penetration shows the scale of insurance activity relative to the economy, while density focuses on individual spending levels. 

A rise in density alongside flat penetration suggests higher premiums among existing policyholders rather than wider insurance coverage. 

Read More: LIC Launches Jeevan Utsav Single Premium Policy: Key Features, Benefits and Income Options Explained! 

Conclusion 

The FY25 data shows little change in India’s overall insurance reach. While per capita insurance spending recorded a small increase, insurance penetration remained flat, indicating that expansion in coverage relative to GDP continues to be limited. 

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