Evaluating the Role of Insurance in Financial Stability and Economic Development

Abstract

This study evaluates the role of insurance in strengthening financial stability and fostering economic development in India. It examines both life and non-life insurance sectors using data from FY 2020–21 to FY 2023–24, focusing on insurance penetration, density, and their relationship with GDP growth. The analysis reveals that while insurance density has gradually increased, penetration has declined due to rapid GDP growth outpacing premium expansion. Insurance serves as a financial stabilizer by mitigating risks, mobilizing capital, and promoting investment in infrastructure and social welfare. It contributes to inclusive growth through employment generation, entrepreneurship support, and improved financial security. The research concludes that enhancing insurance awareness, regulatory frameworks, and public-private collaboration can significantly boost insurance’s contribution to economic resilience and sustainable development in India.