According to a recent report by Swiss Re, the size of the mortality protection gap in India is significant at USD 8,555 billion in 2014, having grown by 11% per annum between 2004 and 2014.
The report showed that for every USD 100 needed for protection, only USD 7.8 is spent by a typical Indian household, leaving a massive protection gap of USD 92.2.
Mortality protection gap represents the difference between the cover typically required by a family and the resources they have available should a wage-earner pass away suddenly.
This study compares the mortality protection gap and its trend across the Asia-Pacific region. The study shows the gap for the 13 Asia-Pacific markets stands at a staggering USD 58 trillion in 2014, compared to USD 42 trillion in 2010.
Insurance has grown strongly in India but from a very low base. In 2014, India had life insurance penetration rate of 2.6% of gross domestic product.
The study showed the sum insured per working person with dependents in India was still low at USD 2,101 in 2014 (about Rs 1.3 lakh).
India ranked ninth with respect to per capita sum insured in 2014, among 13 Asia-Pacific markets examined in this study.
In China, the protection gap has increased by an average of 17% between 2004 and 2014, reaching USD 32,074 billion in 2014 from USD 6,540 billion in 2004.
In India, the gap was USD 3,067 billion in 2004, which has since risen gradually in the last decade to USD 8,555 billion in 2014.
According to Clarence Wong, Chief Economist Asia, in Swiss Re, the increase of the foreign investment limit in Indian insurers to 49% from 26% in 2015 will help to bolster capital of the Indian insurance market and support a stronger drive to close the protection gap.