Most of the people in India treat life insurance as a tax-saving instrument. However, it plays a much greater role for both individuals and the country as a whole. The life insurance plan does works as a safety umbrella as it offers more than one benefit. In life insurance plans an individual can avail the benefit of both insurance coverage and maturity benefit unless it is a pure term plan.
As a result, the life insurance products is not only beneficial for the individual but it also adds to the national GDP as well. Read further to know more about the impact of life insurance on people and nations.
Impact on Personal Level
One cannot ignore the social impact of the life insurance policy. Be it is a pure term insurance plan or any other type of life insurance product, there are millions of families in India who are benefited from the life insurance policy.
On one hand, the term insurance provides financial protection at policybazaar to the family of the insured in case of any eventuality, whereas, on the other hand, life insurance products like endowment helps the individual to accumulated fund, which they can receive as maturity benefit along with the death coverage. Thus, the broad benefits offered by life insurance are:
- Financial protection to the family.
- Tax benefits
- Lifestyle protection, in the future, and present as well.
The policyholder can gain the benefit of both insurance coverage and investment from the ideal life insurance plan. The LI plan ensures insurance protection and enables the policyholder to accumulate wealth in the long-term along with the benefit of tax exemption.
Impact on National Level
The insurance industry, especially life insurance not only offers a net of social security in the developing economy but it also actively contributes to the GDP of both, developed economies (like the US) and emerging economy (like India).
Based on the research, the life insurance industry in India is expected to grow by 12%-15% annually in the next 3-5 years. The life insurance industry in India has a huge potential for growth and is expected to account for 35% of the total savings of India.
The gross life insurance penetration (premium as % of GDP) in India has increased from Rs.2.56 billion in FY 2017 (US$39.7billion) – Rs.3.71 trillion (US$72.6 billion) in FY 2019.
Over the year the share of private sectors in the life insurance industry has grown from 2% in financial 2003- 31.8% in the financial year 2019.
With the people becoming keener in insurance, the innovative products and distribution channels are aiding growth. From FY 2012-2018, the new business life insurance premium in India has increased at 14.44% CAGR.
Global Overview Today
As per the recent study by McKinsey &Co, life insurance has managed better in the emerging markets, despite not working well in alternative savings schemes in the matured market. According to McKinsey, the global growth of the life insurance sector will be led by four of the five major markets i.e. Russia, Brazil, China, and India.
The Organization of Economic Co-operation and Development, of UK and US, explains why life insurance is not doing very well in the mature markets. As compared to the developed countries in India there is a lack of social security, which leads to the increasing demand for life insurance plans like term insurance in the market. Moreover, pure term insurance plans offer higher insurance coverage at minimum premium rates, which the low-income group of individuals can also afford easily.
Insurance Market in Asia
Comprising both non-life and life segments (excluding china from the list), according to Earnest and Young Company India is a driving force in the emerging insurance market of Aisa. In the report of Global Insurance Tend Analysis done by EY in the year 2016, it is shown that India enjoys a massive 71.8% of non-life and life insurance segments.
Wrapping it Up!
The robust GDP expansion, coupled with the current increase in the penetration of insurance will witness high growth in the life insurance sector in the coming 3-4 years. India’s evolving regulatory regime and strong economy continue to support the growth of the insurance and reinsurance sector.