Insurance Penetration and Economic Growth in India

Abstract

Insurance sector is one of the key pillars of the financial services sector and is also central element of the trade and development matrix. A well-functioning insurance sector plays a crucial role in economic development not only at macro-economic levelbut also in terms of the activities of businesses and individuals. A well-functioning insurance sector is a vital piece of nationalinfrastructure. The potential and performance of the insurance sector is universally assessed with reference to two parameters, viz., insurance penetration and insurance density. These two are often used to determine the level of development of theinsurance sector in a country. The present study examines the insurance penetration and density in Indian and also examinesthe global picture of Insurance penetration and insurance density for the period 2001–2013. The purpose of this paper is toestablish the correlation between insurance and economic growth in India, by taking into consideration the share of grosspremium written to GDP (insurance penetration), and the average value of the insurance premium paid by an inhabitantacross one year (insurance density), as insurance indicators. The study shows that insurance penetration and economicgrowth shows a strong linear relationship. The results obtained will be compared with those obtained on other markets.