India’s Insurance Lines to Grow in the Near Future
By Marius | Published December 01, 2011
India’s insurance market will continue to deliver sound growth opportunities across both general and life insurance business lines for the forecast period of 2011-2015, according to two new dossiers from international research firm Bricdata.
In ‘Non-Life Insurance in India, Key Trends and Opportunities to 2015,’ Bricdata explains that despite ongoing global macroeconomic challenges, the Indian general insurance market will continue to grow at a healthy rate. Over the past few years, the level of competition within India’s non-life insurance industry has risen considerably due to the greater presence now of both private and public companies. The report acknowledges that while the large state-backed insurers will continue to dominate the market, private non-life insurers are expected to gradually increase their market share over the next 5 years through improved channel penetration and product innovation, which will be to the overall benefit of the domestic industry and customers.
According to Bricdata, there will be a number of key opportunities for private and foreign insurers in the Indian general insurance market going forward, particularly in motor insurance which is already the most popular business line and is set to grow further as Indian automobile sales continue to flourish. The report also cites the upcoming IRDA regulatory proposal, which will increase the country’s foreign direct investment (FDI) cap from 26 to 49 percent ownership, as a favorable development that will foster a larger and more diverse business and investor environment for product and service innovation if passed. “Private non-life insurance companies are, therefore, expected to substantially expand their market shares in the next five years,” Bricdata surmised.
However, while India’s general insurance industry has indeed experienced considerable growth over the past decade, Bricdata notes that it has so far failed to effectively penetrate into India’s large rural areas, where most of the population lives, due to a general lack of insurance awareness and distribution model deficiencies. To begin solving this dilemma, insurance companies need to better understand the demand-side dynamics, key market trends and growth opportunities within India’s non-life insurance industry, and to assess where competitive advantage dynamics can be sought in the market.
In a separate report, ‘Life Insurance in India, Key Trends and Opportunities to 2015,’ Bricdata analyzed the Indian life market, which is expected to continue outpacing the country’s overall economic growth, with forecasts reaching US$111.9 billion in premium income by 2015, up from US$66.5 billion in 2011 at around a 14 percent annual growth rate. Bricdata cites India’s overall population growth, robust economic expansion, lucrative tax benefits, the rising disposable income of a new middle-class population, and increased awareness of the need for insurance, especially amongst the younger generation, as the primary growth drivers pushing the life industry so far.
The number of life policies sold overall is expected to increase to 85.21 million in 2015 from 53.23 million in 2010, and this will open up new business avenues across the entire insurance industry. The individual life insurance segment, which comprised almost 75 percent of the total Indian life insurance industry last year, is expected to expand to 79.3 percent in 2015 on increased investment in individual life insurance products such as term and pension policies. Unit-linked insurance plans (ULIP) meanwhile are expected to become the fastest growing product category, growing by 21.2 percent annually by 2015, with Bricdata noting that Indian customers were increasingly demanding insurance products that offer some assured income through annuities. Bricdata predict that India will become the third-largest life insurance market in the world by 2015, only behind other fellow Asia-Pacific rivals China and Japan. At present, India is the 12th largest life insurance market in world, 4th in Asia.
According to Bricdata, India’s low life insurance penetration rate combined with the rising overall awareness of the need for adequate protection and savings services will be the key growth factors for the domestic insurance industry going forward. Improved foreign investment practices with more varied capital-raising options will also help create an environment for greater collaborations and joint ventures. With a relatively large number of insurance companies already active in the country, the Indian life insurance industry has shown early signs of entering a consolidation phase. Combined this with improving distribution infrastructure and the widespread adoption of new channels with differentiated product offerings, India competitive landscape will continue to change significantly. The research dossier notes as well that the country’s reinsurance market is also expected to continue growing, driven primarily by growth in non-life, accident and health insurance business lines.
Overall, India looks set to continue being one of the fastest growing insurance markets over the next decade, with rising income levels and awareness of risk management expected to drive a considerable demand for coverage solutions nationwide. Furthermore, Indian insurers could look to make a significant mark and compete on the global stage if they are able to refine their business models and capitalize on the tremendous potential available in their home market.
BRICdata publish in-depth strategic intelligence on emerging markets designed to help clients better understand better identify, understand and pursue growth opportunities in these regions. The company is headquartered in London and covers a broad range of industry sectors, including consumer, financial services, insurance, telecoms, construction and more.