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November, 2011

Indian Insurance Industry: Brief overview

With over 300 million life policies in force, substantial premiums and double-digit growth in both segments (life and non-life), India’s insurance sector is poised to mark incredible pace of progress in the years to come. Liberalisation in the sector led to the entry of foreign players with significant capital commitments and growth aspirations in the Indian insurance arena. Low penetration, availability of a wide variety of products (like unit-linked insurance products, whole life, maximum net asset value (NAV) guarantee etc) and government incentives are the key drivers that would give great impetus to the industry.

Foreign corporate giants are not leaving any stone unturned to be a part of India’s economic growth story and hence are lobbying hard with their lawmakers to aid them in their entrance or expansion plans in the fast-growing Asian economy. Lobbying disclosure reports filed by certain companies with the US Senate reveal that The New York Life Insurance Company has lobbied on ‘issues related to Insurance Act in India, provisions related to cap on foreign investment’, while Prudential Financial Inc has lobbied on ‘issues relating to India financial services market access and equity ownership issues’.

Indian Insurance Industry: Market Share

State-owned Life Insurance Corporation (LIC) of India held a market share of around 76 per cent in terms of new business premium for the financial year up to August 2011 while the remaining was divided among 23 private insurance companies. LIC has been continuously increasing its market share on the back of its strong base of conventional products, which remained unaffected by the change in regulations, and its group retirement plans.

Indian Insurance Industry: Recent Statistics

Data released by the Insurance Regulatory and Development Authority (IRDA) indicates that the life insurance industry collected Rs 49,064 crore (US$ 10 billion) in the first six months of 2011-12 while the non-life insurance industry posted a 26 per cent year-on-year (y-o-y) growth in gross written premium during the same period. According to the data by IRDA, the non-life insurance industry gathered a total premium of Rs 28,604 crore (US$ 5.82 billion) during April-September 2011-12 as against Rs 22,744 crore (US$ 4.63 billion) in the corresponding period last year.

The four state-run insurers - New India Assurance, United India, National India and Oriental India - witnessed an increase of 25 per cent while private sector companies registered a growth of 27 per cent in premium.

During the April-August 2011 , the life insurance industry in India collected premiums worth Rs 71,565.49 crore (US$ 14.57 billion) by writing new policies. While LIC collected Rs 30,912.31 crore (US$ 6.29 billion), private insurers collected Rs 9,740.87 crore (US$ 1.98 billion). In August itself, the total premium collection by the industry was Rs 13,857.89 crore (US$ 2.82 billion), 62 per cent higher than Rs 8,511.25 crore (US$ 1.73 billion) collected in July.

For the general insurance industry, collections stood at Rs 23,712.75 crore (US$ 4.83 billion) by writing new policies during the April-July 2011-12, compared with Rs 19,144.06 crore (US$ 3.89 billion) collected last year. While private insurers registered a growth of 25.97 per cent at Rs 9,861.28 crore (US$ 2 billion), the four state-owned general insurance companies' collection was higher by 22.74 per cent at Rs 13,851.47 crore (US$ 2.82 billion).

Recent Developments

  • Warren Buffet’s Berkshire Hathaway ventured into Indian general insurance industry in March 2011 and is now ready to launch an online term cover to foray into the life insurance segment. Berkshire India, a joint venture (JV) between Nebraska-based Berkshire Hathaway and Allianz, is mushrooming at a fast pace and would also launch a health insurance product soon.
  • Edelweiss Tokio Life Insurance Company Ltd (ETLICL) - a 74:26 JV company between Edelweiss Financial Services Ltd and Japanese insurance major Tokio Marine Holdings – has massive expansion plans on cards. The company is planning to open 33 new branches at selected locations across India, including 14 in Maharashtra, by December 2012.
  • With an aim to strengthen its distribution network and reach out to the rural masses across India, Max Bupa Health Insurance Company Ltd is in talks with regional rural banks, co-operative banks and post offices to distribute its health insurance products. The company, majorly relying on the model of ‘bancassurance’, is in talks with IRDA for the same.
  • IRDA has given its nod to Videocon Group's general insurance JV with the US-based Liberty Mutual Group. Liberty Mutual, with 26 per cent stake in the JV initially, will have an option to increase its stake if regulations permit.