Digital India can be a success only if it is applied to mainstream economic, financial services like insurance

Prithu Sharma 12th October 2017

Digital India can be heralded as a success only if its application is integrated into mainstay economic and financial services, including insurance.

In 2000, when the Indian insurance sector was deregulated and FDI with a cap of 26% was allowed in the sector, the private sector was quick to respond. By 2011, the numbers of players in the life insurance segment had increased to 24, and they accounted for more than a quarter of the market, based on total premium. Accompanying this was the impressive increase in life insurance penetration levels (defined as amount of total premium as a percentage of GDP), as well as life insurance density (premium per capita). While the former had increased from a dismal figure of 2.15% in FY02 to 4.6% in FY10, the latter reached a peak of $55.7 in FY12, having been a mere $9.1 in FY02.

However, following this honeymoon phase of sorts, which lasted for close to a decade after the deregulation of the insurance sector, there was an almost secular drop in penetration level as it fell to 2.76% by FY16, and while the insurance density has been much more resilient, the overall downward trend in the life insurance sector is as discernible and ominous as the black sails of Theseus’ Ship to King Aegeus. Only this time around, the black sails are the constantly declining company branches, agents, etc. The number of branches of life insurance firms has virtually stagnated at around 11,000 since FY10, and the number of individual agents has fallen from around 28 lakh in FY10 to around 20 lakh in FY16. The fate of corporate agents is no better.

Note: Views expressed in this blog are those of the author.