India’s overall level of insurance penetration (total insurance premiums as a percentage of GDP) has seen a slight increase of 0.2 per ent  since 2012 but it continues to have one of the highest underinsurance levels globally according to new research from Lloyd’s, and the Centre for Economic and Business Research (CEBR).

India has one of the world’s biggest insurance gaps at 1.0% of its GDP or US$27bn,which representsan increase from US$19.7bn in 2012. India’s insurance gap accounts for 17% of the total global insurance gap.


Since Lloyd’s last underinsurance report, India is the only country that has dropped out of top 10 countries with highest expected losses per annum as a percentage of GDP, but this is partly due to the fact thatthe Philippines entered the top 10 as a result of the devastating damage it suffered from Typhoon Haiyan in 2013.


Lloyd’s India Country Manager, Shankar Garigiparthy, said mostly the protection gaps have happened in manufacturing,education and IT segments that while progress has been made, the rate at which India’s insurance gap is closing is not fast enough. Significant exposure to risk remains and with agrowing number of social, environmental and business risks, and with India’s economy on the rise, this insurance gap will only increase unless penetration accelerates.

“The insurance sector, in partnership with governments, must act to help address the underinsurance crisis,both in India and globally, to reduce the threat to global prosperity, especially since greater resilience builds business confidence which stimulates economic growth.The government needs to further liberalise and should consider 100 FDI in the sector. ”


India, along with Bangladesh, Vietnam, Philippines and Indonesia were singled out in Lloyd’s Underinsurance Report as being among the countries most exposed to risks of natural disasters, such as climate change, and are the countries least able to fund recovery efforts.


Each of thesecountries have an insurance penetration rate of less than 1 percent India has a level of insurance penetration at 0.9 per ent of GDP. This is in comparison with China at 1.9 per cent, Vietnam 0.8 per dent Philippines 0.6 per ent and Indonesia 0.5 per cent.


China is the country with the highest insurance gap (US$76bn) of the 43 countries studied in the report and this is largely due to the size of its economy and the fact that its insurance market is still developing. In fact, 98% of losses resulting from natural catastrophes in China between 2004-2017 were not covered by any type of insurance.


The country with the highest expected annual loss from natural disasters, Bangladesh, also has the largest insurance gap relative to GDP (2.1%). Expressed in absolute dollar values this equates to an insurance gap of almost US$6bn in Bangladesh. The second highest is Indonesia at 1.4% of GDP, equivalent to an insurance gap of US$15bn.


In Lloyd’s Underinsurance Report 2018, underinsurance continues to represent a significant threat to global economic development with an estimated US$163bn of assets underinsured in the world today. In 2012, the first edition of the global report revealed US$168bn in underinsured assets globally. While the global gap has closed by almost 3% over the last six years, the gap for Asian countries included in the report has widened by 9.4% to US$134bn. At the same time, the world has seen a series of extreme weather-related catastrophes and new risks such as cyber attacks have emerged, posing additional threats to society.


Underinsurance in a growing cyber security market

Lloyd’s Underinsurance Report 2018 also examines the emerging threat of cyber attacks, which is estimated to cost businesses as much as US$450 billion a year globally. Despite the loss of data, revenue and reputation from a cyber attack being potentially as destructive as any natural disaster, this was an area with a high level of underinsurance, with levels of cyber insurance engagement varying dramatically globally. 


The cyber security market in the US is the most mature, primarily because 46 out of 50 of the US states have mandatory requirements for data breach notification which can be extremely costly. Despite the rapid growth in digitisation across Asia Pacific, governments have been slow in implementing similar types of laws and countries in the region still lack notification clauses for data breaches, with the exception of Australia, Japan, South Korea and the Philippines.