With 36 crore policies, India's life insurance sector is the world’s largest. The life insurance industry in the country is forecasted to increase at a compound annual growth rate (CAGR) of 12–15 per cent in the next five years. The industry aims to hike penetration levels to five per cent by 2020, and has the potential to touch US$ 1 trillion over the next seven years.
The cap on foreign direct investment (FDI) also looks likely to be increased from 26 per cent to 49 per cent. The Insurance Bill which has been approved by the Government of India and will in all possibility be cleared by the Parliament is expected to increase FDI inflows to US$ 10 million in the short term.
Information technology (IT) services, the biggest spending segment of India’s insurance industry at Rs 4,000 crore (US$ 666.78 million) in 2014, is expected to continue enjoying strong growth at 16 per cent. Category leaders are business process outsourcing (BPO) at 25 per cent and consulting at 21 per cent.
India ranked 10th among 147 countries in the life insurance business in FY 13, with a share of 2.03 per cent. The life insurance premium market expanded at a CAGR of 16.6 per cent from US$ 11.5 billion to US$ 53.3 billion during FY 03–FY 13. The non-life insurance premium market also grew at a CAGR of 15.4 per cent, from US$ 3.1 billion in FY 03 to US$ 13.1 billion in FY 13.
The following are some of the major investments and developments in the Indian insurance sector:
In a bid to facilitate banks to provide greater choice in insurance products through their branches, a proposal will likely be made which will allow banks to act as corporate agents and tie up with multiple insurers. A committee established by the Finance Ministry of India is likely to suggest this model as an alternative to the broking model.
Public sector banks will soon be offering their customers a choice of insurance products from different companies as against products from a single company. The Finance Ministry of India has written to public sector banks, asking them to turn into insurance brokers instead of corporate agents. "By becoming brokers, banks would now be directly responsible for mis-selling as against earlier when they were seen to be acting as agents of insurance companies," said Mr Sam Ghosh, CEO, Reliance Capital.
IRDA body Insurance Information Bureau (IIB) has created a registry of healthcare providers and allocated them unique IDs. By creating this database, the regulator plans to build an analytics capability for spotting endemics, evaluating medical cost inflation, and detecting fraud.
The insurance sector’s future looks bright, on the back of India’s favourable demographic, greater awareness, supportive regulatory environment, policies that improve customer-centric products, and practices that help businesses grow. India's insurable population is projected to touch 75 crore in 2020, with life expectancy reaching 74 years. Life insurance will continue to supplement household financial savings, and is projected to be 35 per cent of total savings by the end of this decade, as against 26 per cent in 2009–10.
Exchange Rate Used: INR 1 = US$ 0.0167 as on May 8, 2014
References: Media Reports, Press Releases, IRDA Journal