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Indian Insurance Industry Overview & Market Development Analysis

April, 2018

Introduction

The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.

Out of 33 non-life insurance companies, five private sector insurers are registered to underwrite policies exclusively in health, personal accident and travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialised insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance.

Market Size

Government's policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes are expected to catapult this key ratio beyond 4 per cent mark by the end of this year, reveals the ASSOCHAM latest paper.

The number of lives covered under Health Insurance policies during 2015-16 was 36 crore which is approximately 30 per cent of India's total population. The number has seen an increase every subsequent year as 28.80 crore people had the policy in the previous fiscal.

Premium income of the life insurance segment had increased 14.04 per cent in FY17 to Rs 4.18 trillion (US$ 64.92 billion). In August 2017, the Life Insurance industry reported a 24 per cent growth in overall annualised premium equivalent with the help of both private players and Life Insurance Corporation.

Investments

The following are some of the major investments and developments in the Indian insurance sector.

  • Pradhan Mantri Fasal Bima Yojana (PMFBY) covered 50.9 million farmers in India in 2016-17.
  • India's leading bourse Bombay Stock Exchange (BSE) will set up a joint venture with Ebix Inc to build a robust insurance distribution network in the country through a new distribution exchange platform.
  • Revenues of the healthcare sector are projected to grow by 15 per cent between FY18-20 on the back of rise in health insurance coverage through government-sponsored schemes@.

Government Initiatives

The Government of India has taken a number of initiatives to boost the insurance industry. Some of them are as follows:

  • Government of India launches Pradhan Mantri Vaya Vandana Yojana, a pension scheme which will provide guaranteed 8 per cent annual return to all the senior citizen above 60 years of age for a policy tenure of 10 years.
  • The Union Cabinet has approved the public listing of five Government-owned general insurance companies and reducing the Government’s stake to 75 per cent from 100 per cent, which is expected to bring higher levels of transparency and accountability, and enable the companies to raise resources from the capital market to meet their fund requirements.
  • The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue redesigned initial public offering (IPO) guidelines for insurance companies in India, which are to looking to divest equity through the IPO route.
  • IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds that are issued by banks to augment their tier 1 capital, in order to expand the pool of eligible investors for the banks.

Road Ahead

The future looks promising for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers. India with 3.42 per cent penetration rate in the insurance sector offers greater penetration potential when compared to global average of 6.2 per cent

The country’s insurance market is expected to quadruple in size over the next 10 years from its current size of US$60 billion.

Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.

Exchange Rate Used: INR 1 = US$ 0.015 as on January 4, 2018

References: Media Reports, Press Releases, Press Information Bureau, Union Budget 2017-18, Insurance Regulatory and Development Authority of India (IRDA)

Notes: @ - according to Crisil Ratings