The Insurance Regulatory and Development Authority of India (Irdai) has set a premium growth target for life insurers for the first time, aiming to double insurance penetration in India.

In an email correspondence with general managers and CEOs of life insurers, the insurance regulator recommended Gross Written Premium (GWP) growth targets for each insurer.

“Irdai provides each life insurer with an indicative target of their total GWP over the next five years,” IndiaFirst Life Insurance deputy CEO Rushabh Gandhi told Business Standard.

“It also proposes to discuss any regulatory support that insurers may need to achieve the target. Overall, this will help significantly increase insurance penetration in the country.”

Irdai has set a GWP Compound Annual Growth Rate (CAGR) target of 30% over five years due to the large base of top insurers, but it recommends a 50% CAGR for smaller companies.

GWP is the sum of new business premiums and renewal premiums. For each insurer, the regulator has also identified a country that should lead the push to increase insurance penetration.

“Irdai has sent separate emails to individual companies setting out growth targets. All life insurers have been given targets. The regulator aims to increase insurance penetration in the country over the next five years. Insurance penetration the percentage of GDP is low, and regulators want to double it in the next five years. If every insurer drives growth, then the overall insurance penetration will increase,” said the CEO of a life insurer.

According to Irdai’s annual report, India’s life insurance penetration is 3.2%, while the country’s overall insurance penetration is only 4.2%. Insurance penetration is measured as a percentage of GDP.

“Because Irdai has a developmental role, setting targets for insurers is well within its scope,” said an insurance industry veteran.

While regulators have set targets for individual life insurers, it is unclear whether insurers will face any action for failing to meet those targets.

“It’s unclear what the impact will be if the company fails to meet its targets. It’s a five-year plan, and it’s not that the regulator won’t ask us to show progress every two months. As of now, the regulator has not said that some MD/CEO compensation should be tied to such goals,” the person said.

Over the past few months, since Debasish Panda took over as chairman of Irdai, regulators have made a series of changes to regulations to make it easier for insurers to create innovative products and bring them to market. It also reduces the compliance burden of insurance companies to a certain extent.

Irdai extends the “use and file” procedure to most life insurance products, banning personal savings, pension, and annuity products. This means that life insurers can launch these products without prior approval from the insurance regulator. It reduces the capital required by insurers offering policies under Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) by nearly 50%.