New Delhi, Oct 22 : Insurance sector in India grew at an impressive 15 per cent compound annual growth rate (CAGR) over the past two decades, with premiums reaching Rs 10.4 lakh crore in FY23, and there is immense potential for growth that remains untapped, industry experts said on Wednesday.

Despite the consistent growth, India's insurance penetration at 4 per cent, which is significantly lower than the global average of 6.8 per cent, and protection gap of $40 billion indicate substantial room for further expansion and development, according to the report by KPMG in India, in collaboration with the Confederation of Indian Industry (CII).

Supportive government initiatives and a conducive regulatory environment have played a crucial role in pushing the insurance penetration upwards. Schemes like Pradhan Mantri Jan Arogya Yojana (PM-JAY) have expanded coverage for the poor and vulnerable sections of the society.

The report highlighted the critical need for innovative insurance solutions to address the evolving risks, such as the ones posed by climate change, particularly in the agricultural sector, which is increasingly vulnerable to extreme weather events.

"Insurance sector in India is on the cusp of a new journey as we aim to insure a billion+ people. Digital-first innovative business models can significantly bridge the protection gap and move us closer to the vision of 'Insurance for All' by 2047,' said Hemant Jhajhria, National Head of Consulting, KPMG in India.

'Our focus now should shift towards developing customer-centric solutions and leveraging digital technologies to enhance policyholder experience, ensuring insurance accessibility and availability,' added Chandrajit Banerjee, Director General, CII.

The report also explored the potential of integrating digital payment systems and leveraging government-promoted public digital infrastructure to enhance financial inclusion and expand insurance coverage among underinsured and marginalised customer segments.

It stressed that the industry needs micro-insurance and parametric insurance solutions, particularly for the unorganised sector such as individual farmers, to address the protection gap and the challenges posed by evolving risks such as climate change.

/IANS