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With the improvement of reforms, Insurance market has been flooded with a number of players. Since March 2006, among the life insurers, there were 151 companies in private sector and Life Insurance Corporation of India (LIC) was the single public sector company. Among non-life insurers, nine companies were in private sector and four companies were in public sector (Annex II). As about the present size of the insurance market in India, it is stated that India accounts not even one per cent of the global insurance market. However, studies have pointed out that India’s insurance market is predicted to grow rapidly in the next 10 years. Mathur (2004) for instance, stated that in spite of considerable growth of life insurance business through the outstanding efforts of LIC,only 25 to 26% of insurable population in India has been insured.
In terms of ‘insurance penetration ratio’ (defined as ratio of insurance premium to GDP), a key indicator of the widen insurance coverage and insurance culture, India compares poorly by international standards. The penetration ratio was less than one per cent in 1990s and it improved to 4.8% by end-March 2006. As against this, a Survey Report of Swiss Re revealed that the penetration ratio as at end-March 2006, in respect of some of the European countries, viz., UK and Switzerland at 16.5% and 11.0%. In Asia, Taiwan and South Korea had registered their respective ratio of as high as 14.5% and 11.1%. Insurance Penetration ratio for the World was positioned at 7.5% far greater than that of India.
Hence in a country with more than 1.2 billion population, the less penetration ratio indicates that a vast majority of population remain outside the reach of the insurance, especially in rural and semi-urban areas, in the context of the absence of social security schemes. This clearly indicates the presence of vast potential for tapping the insurance market particularly by widening the distribution channels. This is where the strategy of bancassurance could probably become more relevant.