India's Insurance Protection Gap

How much insurance Indians have compared with other countries, why so many families remain underinsured, and what the protection gap means.

Insurance protects families from financial shocks like illness, death and accidents. Yet many Indians remain underinsured.

Insurance penetration

Insurance penetration, premiums as a share of GDP, has been around 4 percent in India, below the global average and far below many rich countries.

Much of India’s life insurance premium goes to savings-linked products rather than pure protection, so actual protection is even lower.

The protection gap

The protection gap is the difference between the cover people need and what they have. Studies by reinsurers such as Swiss Re estimated India’s mortality protection gap at over 80 percent: families have far less life cover than needed to replace lost income.

Why the gap exists

Low incomes and competing priorities.
Lack of awareness and trust.
Complex products and mis-selling.
Informal work, without employer insurance.
Preference for investment returns over protection.

Consequences

Medical costs push millions of families into poverty each year.
The death of an earning member can leave families destitute.
Disasters cause losses that aren’t covered.

Goals

The insurance regulator IRDAI set a goal of “Insurance for All by 2047”. Government schemes like PMJJBY, PMSBY and Ayushman Bharat aim to widen coverage.

The uninsured family

A family's main earner dies suddenly. With no term insurance, the family must sell land and borrow to cover expenses. A term policy costing a few thousand rupees a year could have provided a large lump sum.

Thinking having a life insurance policy means being adequately insured

Many policies are savings products with small cover, far below what families need.

Key takeaways

India's insurance penetration is around 4 percent of GDP.
The mortality protection gap is estimated at over 80 percent.
Low incomes, awareness, complex products and informal work drive the gap.
IRDAI aims for "Insurance for All by 2047".