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Insurance

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Insurance Sector in India

November, 2012

Brief Introduction

A robust insurance sector stabilises any country’s economy as it facilitates long-term funds for infrastructural development by strengthening the overall risk-taking ability. India’s Rs. 221, 400 crore (US$ 40.26 billion) insurance industry is at a stage of consolidation wherein many foreign players are eyeing the immense potential of the fast-growing economy. Relatively lower insurance penetration, rising income levels of the middle-class population and increasing awareness about the concept of insurance are certain factors that promise bright future for the Indian insurance segment.

Life insurance products’ penetration in India is around 4.5 per cent while that of general insurance products is around 1 per cent. Indian insurance industry is rapidly opening up to foreign players. Currently, 22 out of 24 life insurance players and 18 out of 27 non-life insurers have foreign partners, and many more are vying to enter the Indian landscape.

Key Statistics

Premium collection by general insurance companies increased by 24.7 per cent year-on-year (y-o-y) in September 2012 at Rs 6, 059.02 crore (US$ 1.1 billion), according to the data compiled by the sector regulator Insurance Regulatory and Development Authority (IRDA). The total premium stood at Rs 34,001.09 crore (US$ 6.18 billion) for April-September 2012.

In terms of premium collections for life insurance segment, private players collected Rs 7,095 crore (US$ 1.29 billion) in April-September 2012 period while state-owned Life Insurance Corp of India (LIC) recorded a remarkable 24 per cent y-o-y growth in premium collections at Rs 15, 532.7 crore (US$ 2.82 billion) during the period. LIC’s support helped the industry post a 15 per cent y-o-y growth in premium collected in the first half of 2012-13.

New Developments/ Product Launches

World Economic Forum’s latest report ‘Financial Development Report 2012’ has named India as the world's top-ranked country in terms of life insurance density. Life insurance density is the ratio of direct domestic premiums for life insurance to per capita gross domestic product (GDP) of a country. India has been ranked 40th in terms of overall financial development of a country, but is much ahead of larger economies like the US, the UK, Japan and China for life insurance density.

  • Cabinet’s approval to raise foreign direct investment (FDI) limit in the insurance sector from 26 per cent to 49 per cent has opened gateways for foreign insurers. While Magma HDI General Insurance and Liberty Videocon General Insurance have initiated operations, Avantha group has entered into an alliance with Germany’s Ergo Insurance Group to form Avantha Ergo Life Insurance

    Magma HDI General Insurance is a joint venture (JV) between Kolkata-based Magma Fincorp and Germany-based HDI-Gerling International Holding while Liberty Videocon General Insurance is a JV between US' Liberty Mutual Insurance and Videocon Group

  • The Ergo Insurance Group (part of world’s leading reinsurer Munich Re) and the Avantha Group, India's leading business conglomerate, have entered into a JV agreement in the space of life insurance. The new company, to be named Avantha Ergo Life Insurance Company Ltd, is expected to commence operations at the beginning of 2014, subject to regulatory approval
  • Mahindra Finance’s subsidiary Mahindra Insurance Brokers (MIBL) has inked a strategic partnership agreement with LeapFrog Investments, one of the world’s largest investors in insurance to under-served consumers. LeapFrog’s subsidiary, Inclusion Resources Singapore, would invest Rs 80.41 crore (US$ 14.63 million) for a 15 per cent stake in MIBL as per the agreement. The alliance would focus on introducing new range of products to the people who haven’t got access to insurance services. Their first launch would contain health insurance products and services
  • Religare Health Insurance and Magma Fincorp are two new entrants on the insurance block. Religare Health Insurance has taken off as a standalone health insurance company while non-banking financial company (NBFC) Magma Fincorp has ventured into the general insurance business through a JV with HDI Gerling, a leading German insurer. Magma HDI General Insurance (MHDI) will be the new entity