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Indian Insurance Industry Analysis

October, 2019

Post-liberalisation, the insurance industry in India has recorded significant growth. The Indian insurance industry is expected to grow to Rs 19,56,920 crore (US$ 280 billion) by FY2020, owing to the solid economic growth and higher personal disposable incomes in the country. Overall insurance penetration in India reached 3.69 per cent in 2017 from 2.71 per cent in 2001. Gross premiums written in India reached Rs 5,78,000 crore (US$ 82.8 billion) in FY19, with Rs 4,08,000 crore (US$ 58.5 billion) from life insurance and Rs 1,69,000 crore (US$ 24.3 billion) from non-life insurance.

Life insurance industry in the country is expected grow 12-15 per cent annually for the next three to five years.

Gross direct premiums of non-life insurers in India reached US$ 13.66 billion in FY20 (up to September 2019), gross direct premiums reached US$ 5.87billion, showing a year-on-year growth rate of 14.47 per cent and Gross direct premium from health insurance reached Rs 8.48 crore (US$ 1.21 million) in FY20 (up to June 2019), contributed 5.87 per cent to the gross direct premiums of non-life insurance companies in India.

Crop insurance segment contributed 30 per cent to gross direct premiums of non-life insurance companies in FY20 (up to September 2019).

There are 24 life insurance and 33 non-life insurance companies in the Indian market who compete on price and services to attract customers. There are two reinsurance companies. The industry has been spurred by product innovation, vibrant distribution channels, coupled with targeted publicity and promotional campaigns by the insurers. The market share of private sector companies in the non-life insurance market rose from 13.12 per cent in FY03 to 55.7 per cent in FY20 (up to April 2019). In life insurance segment, private players had a market share of 25.29 per cent in new business in FY19.

Government has approved the ordinance to increase Foreign Direct Investment (FDI) limit in Insurance sector from 26 per cent to 49 per cent which would further help attract investments in the sector. As per Union Budget 2019-20, 100 per cent foreign direct investment (FDI) will be permitted for insurance intermediaries.

In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth US$ 903 million. Enrolments under the Pradhan Mantri Suraksha Bimas Yojana (PMSBY) reached 130.41 million in 2017-18. National Health Protection Scheme was announced under Budget 2018-19 as a part of Ayushman Bharat. The scheme will provide insurance cover of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable families in India.

Going forward, increasing life expectancy, favourable savings and greater employment in the private sector is expected to fuel demand for pension plans. Likewise, strong growth in the automotive industry over the next decade would be a key driver for the motor insurance market.

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