India is the 10th largest life Insurance market globally and is the 4th largest general insurance market in Asia and the 14th largest globally. The Economic Survey 2022-23 noted that life insurance penetration has gone up to 4.2% in 2021 almost like what it was a year before that, but significantly higher than 2.7% growth registered in around the year of 2000.
The 2024-25 Interim Budget elevating agriculture's value addition and augmenting farmers' income by boosting post-harvest investments, aiding 11.8 crore farmers under PM-KISAN SAMMAN YOJANA, ensuring crop insurance for 4 crore farmers.
The Union Budget 2023-24 has proposed to limit the income tax exemption on the proceeds of high value life insurance policies. Mooted as part of an emphasis on better targeting of tax concessions and exemptions, the proposal means that income from life insurance policies with an aggregate premium up to Rs. 5 lakh (US$ 6,075) will be exempt from taxation.
In the financial year 2023, India's insurance premium penetration accounted for 4% of the GDP, with life insurance making up 3% and non-life insurance comprising 1%.
The penetration of Indian insurance industry was less than 5% of the GDP. IRDAI data shows that India’s insurance penetration was 4% of the GDP in 2022-23.
In FY24, non-life players’ saw a premium income increase by 19.5% year-over-year to Rs. 1,14,972 crore (US$ 13.8 billion) due to strong demand for health and motor policies. The business growth for FY24 was driven by health (especially the group segment), motor, and crop Insurance.
As per a report published by Deloitte, in India the insurance market is slated to increase four folds in size over the next 10 years. The life insurance sector is the biggest in the world with about 70,000 Crore premiums yearly, and it is growing at a positive rate of 17% every year.
The insurance industry in India has witnessed an impressive growth rate over the last two decades driven by the greater private sector participation and an improvement in distribution capabilities, along with substantial improvements in operational efficiencies.
Private players have seen decent growth in individual single premium, group single premium, and individual non-single premium.
As announced in June 2023, Go Digit Life Insurance, in which both HDFC Bank and Axis Bank have bought stakes, plans to invest Rs. 500-600 crore (US$ 60.3-72.4 million) in the initial 18 months to start out as the country's 26th life insurer.
Mr. Debashish Panda, Chairman, IRDAI informed that the insurance industry of India has become a Rs. 59 crore (US$ 7.1 million) industry as of February 2023.
In FY24, life insurers’ new business premiums grew to Rs. 377,960 crore (US$ 45.3 billion), according to Life Insurance Council data.
In the first-year premium share of life insurance in India, LIC dominates with 58.87%, while the private sector holds 41.13%.
Among the private players, SBI Life, HDFC Life and ICICI Prudential Life led the industry in premium collection. SBI Life collected Rs. 38,238 crore (US$ 4.60 billion) premium, while HDFC Life and ICICI Prudential Life received Rs. 29,988 crore (US$ 3.60 billion) and Rs. 18,081 crore (US$ 2.17 billion), respectively.
The premium in the month of March 2023 for the private life insurance industry grew at a healthy pace of 35% on a year-on-year basis and 20% for FY23.
The state-run insurance behemoth LIC alone contributed over 58.87% to the total new business premium collection. The insurer received close to Rs. 2.22 lakh crore (US$ 26.65 billion) as premium in FY24 compared to Rs. 2.31 lakh crore (US$ 28.28 billion) In FY24.
No. of non-life insurance policies witnessed a growth from 253.1 million in FY22 to 301.8 million in FY23.
In April 2024, CCI has approved Axis Bank Limited's subscription to 14,25,79,161 equity shares of Max Life Insurance Company Limited.
In India, gross premiums written off by non-life insurers reached US$ 25.69 billion in FY24 (Until December 2024) and US$ 31 billion in FY23.
Among the private players, SBI Life, HDFC Life and ICICI Prudential Life led the industry in premium collection. SBI Life collected Rs. 29,600 crore (US$ 3.58 billion) premium in FY23 while HDFC Life and ICICI Prudential Life received Rs. 28,900 crore (US$ 3.49 billion) and Rs. 17,000 crore (US$ 2.05 billion), respectively.
The growth of the insurance market is being supported by important government initiatives, strong democratic factors, conducive regulatory environment, increased partnerships, product innovations, and vibrant distribution channels.
Insurance Industry was largely dominated by offline channels like corporate agents, offline brokers or banks. Today, rapid digitization, product innovation and progressive regulation policies have made it possible for consumers to buy insurance through multiple distribution channels with the click of a button.
The insurance industry in India has witnessed an impressive growth rate over the last two decades driven by the greater private sector participation and an improvement in distribution capabilities, along with substantial improvements in operational efficiencies.
Over the past nine years, the insurance sector has attracted substantial foreign direct investment amounting to nearly Rs. 54,000 crore (US$ 6.5 billion), driven by the government's progressive relaxation of overseas capital flow regulations.
Insurers are swiftly integrating technologies such as robotic automation, artificial intelligence, cloud computing, and data analytics. These advancements are revolutionizing both front-end and back-end operations, ushering in a era where hyper-personalized products and omnichannel servicing are becoming standard practice.
As announced in November 2023, Zurich Insurance Group is set to acquire a majority stake in Kotak General Insurance, marking the first major foreign investment in India's insurance sector in eight years. CCI has approved acquisition of 70% stake by Zurich in Kotak Mahindra Company.
As informed in September 2023, the UK and India have agreed to launch a partnership to boost cross-market investment by the insurance and pension sectors.
In August 2023, Tata AIA launched a ULIP plan with benefits of critical illness cover- Tata AIA Pro Fit.
In October 2022, Policybazar’s launches its mobile app to facilitate the ease of insurance business for its advisors digitize their insurance business.
Canara HSBC Life Insurance launched its ‘Canara HSBC Life Insurance App’ on the 75th Independence Day of India. The app, available on android, iOS devices and web portal, offers access to policy details, the option to receive timely alerts, pay the premium, and track fund value among others.
Merger and acquisitions will continue to be a part and parcel of the insurance sector, which is a highly capital-intensive sector and can accommodate new entrants with specialised skill sets having long-term vision. The past developments in this sector and recent decision of the Mumbai National Company Law Tribunal (NCLT) allowing merger of Exide Life Insurance with HDFC Life is an indication that entities without requisite expertise may quit the sector.
Bajaj Allianz Life Insurance, a private life insurer, has entered into a strategic partnership with City Union Bank, one of the oldest private sector banks in India. This partnership will help the private life insurer offer a wide array of life insurance solutions to the bank’s existing and future customers, across their 727 branches.
Insurers can now launch new health insurance products without IRDAI’s nod. Earlier the flexibility was given for group insurance products but now retail products have also come under the new norms.
The insurance industry is expected to use this opportunity for introduction of customized and innovative products, expansion of the choices available to the policyholders in order to address the dynamic needs of the market, which will further help in enhancing the insurance penetration in India.
The life insurance industry is expected to increase at a CAGR of 5.3% between 2019 and 2023. India’s insurance penetration was pegged at 4.2% in FY21, with life insurance penetration at 3.2% and non-life insurance penetration at 1%. In terms of insurance density, India’s overall density stood at US$ 78 in FY21. Premiums from India’s life insurance industry is expected to reach Rs. 24 lakh crore (US$ 317.98 billion) by FY31.
There are 26 life insurance and 47 non-life insurance companies in the Indian market who compete on price and services to attract customers, whereas there are two reinsurance companies. The industry has been spurred by product innovation and vibrant distribution channels, coupled with targeted publicity and promotional campaigns by insurers.
The market share of private sector companies in the general and health insurance market increased from 48.03% in FY20 to 49.31% in FY21 to 62.5% in FY23. The gross premium collected by life insurance companies in India increased from US$ 39.7 billion in FY12 to US$ 89.3 billion in FY22. In FY22, premiums from new businesses of life insurance companies in India stood at US$ 40.1 billion. The sum insured for the life insurance industry grew at 16.81% in 2021-22. In FY23 (Until October 2022), premiums from new businesses of life insurance companies in India stood at US$ 25.3 billion. In October 2022, life insurers’ new business premiums grew to Rs. 15,920.13 crores (US$ 1.94 billion), according to Life Insurance Council data. In FY23, non-life insurers (comprising general insurers, standalone health insurers and specialized insurers) recorded a 16.4% growth in gross direct premiums.
Between April 2021-March 2022, gross premiums written off by non-life insurers reached Rs. 220,772.07 crore (US$ 28.14 billion), an increase of 11.1% over the same period in FY21. In May 2022, total premium earned by the non-life insurance segment stood at Rs. 36,680.73 crore (US$ 4.61 billion), a 24.15% increase as compared to the same period previous year.
In July 2021, non-life insurance premium stood at Rs. 20,171 crore (US$ 2.71 billion), an increase of 19.5% YoY, as compared with Rs. 16,885 crore (US$ 2.26 billion) in July 2020. The growth was driven by strong performance from health and motor segments.
In July 2021, standalone private health issuers registered a premium growth of Rs. 1,753 crore (US$ 235.11 million), an increase of 27.5% YoY.
Between April 2021 and January 2022, gross premiums written off by non-life insurers reached Rs. 227,188.89 crore (US$ 21.24 billion), an increase of 6.94% over the same period in FY21. In January 2022, total premium earned by the non-life insurance segment stood at Rs. 21,957.03 crore (US$ 2.85 billion), as compared to the Rs. 21389.70 crore (US$ 2.77 billion) recorded in January 2021.
The gross direct premium income for the general insurance industry in India stood at Rs. 1,087 billion (US$ 14.62 billion) in FY22 (until September 2021), an increase of 12.3% YoY, due to 28.8% growth in the health segment and an 84.7% growth in the personal accident segment.
In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by rising demand for health insurance products amid COVID-19 surge.
The total benefit amount claimed from private life insurance companies was Rs. 5,725 crore (US$ 780 million), whereas LIC had a total benefit claim amount of Rs. 13,694 crore (US$ 1,866 million) in FY20. With such a huge base, LIC performed well to maintain a settlement ratio of 96.69% by number of policies and 93.45% by benefit amount.
Indian start-ups are also focusing on accelerating insurance reach to customers. For instance, in November 2021, vKover, an online platform, announced plans to recruit 10,000 agents in the next two years, in Kerala. The company plans to establish a network of 100,000 digital agents in India, by 2026.
Union Budget 2021 increased FDI limit in insurance from 49% to 74%. India's Insurance Regulatory and Development Authority (IRDAI) has announced the issuance, through Digilocker, of digital insurance policies by insurance firms.
Under the Union Budget 2021, Finance Minister Ms. Nirmala Sitharaman announced that the initial public offering (IPO) of LIC was to be implemented in FY22, as part of the consolidation in the banking and insurance sector. Though no formal market valuation has been undertaken, LIC’s IPO has the potential to raise Rs. 1 lakh crore (US$ 13.62 billion). In FY22, LIC achieved a record first-year premium income of Rs. 1,98,759.85 crore (US$ 25.33 billion) under individual assurance business with a 7.92% growth over last year.
In February 2021, the Finance Ministry announced to infuse Rs. 3,000 crore (US$ 413.13 million) into state-owned general insurance companies to improve the overall financial health of companies.
According to data from the Insurance Regulatory and Development Authority of India (IRDAI), 25 general insurance companies recorded a 10.8% increase in their collective premium in January 2021 to Rs. 16,247.24 crore (US$ 2.24 billion) compared with Rs. 14,663.40 crore (US$ 2.02 billion) in January 2020.
ICICI Lombard and Airtel Payments bank have entered into a partnership for providing cyber insurance in February 2022. Probus Insurance receives US$ 6.7 million in funding from a Swiss impact fund in December 2021. In September 2021, ZestMoney raised US$ 50 million to enter new business opportunities in the insurance sector.
In August 2021, PhonePe announced that it received preliminary approval from IRDAI to act as a broker for life and general insurance products. As a result, the company can now offer insurance advice to its 300+ million users.
In July 2021, non-life insurers’ premium, which include general, standalone and specialised public-sector, recorded 19.46% YoY growth and reached Rs. 20,171.15 crore (US$ 2.71 billion) against Rs. 16,885 crore (US$ 2.27 billion) in the same month last year.
On July 1, 2021, the LIC introduced its Saral Pension Scheme, which is a non-linked, non-participating, single premium, individual immediate annuity plan.
In June 2021, Aditya Birla Sun Life Insurance announced the launch of a new Vision Life Income Plus Plan that will provide guaranteed regular income plus flexible bonus payouts to policyholders.
In May 2021, Max Life Insurance Co. Ltd. launched ‘Max Life Saral Pension’, a non-linked, individual immediate annuity plan.
In April 2021, Life Insurance Corporation of India (LIC) collaborated with Paytm to facilitate digital insurance payments.
In April 2021, Bharti AXA Life Insurance announced a bancassurance partnership with Fincare Small Finance Bank to offer life insurance products to >26.5 lakh customers.
In April 2021, Life Insurance Corporation of India (LIC) collaborated with Paytm to facilitate digital insurance payments.
In September 2021, the Union Cabinet approved an investment of Rs. 6,000 crore (US$ 804.71 million) into entities, offering export insurance cover to facilitate additional exports worth Rs. 5.6 lakh crore (US$ 75.11 billion) over the next five years.
Going forward growing middle class, increasing awareness about the importance of insurance, and digital advancements, the sector is expected to expand further 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. Motor insurance accounted for 31.6% of the non-life insurance premiums earned, followed by health insurance at 35.3%, in FY23.
The public and private sectors have been actively working towards crop insurance. For instance, in October 2020, the Andhra Pradesh rolled out free of cost crop insurance scheme for the state farmers while the Reliance General Insurance and SatSure partnered to launch the satellite-based crop monitoring and predictive analytics support for better risk management and to improve efficiency of its crop insurance business operations. On January 13, 2021, Crop Insurance Scheme, the Pradhan Mantri Fasal Bima Yajana (PMFBY), completed five years of operations towards strengthening risk coverage of crops for farmers of India. In past eight years, 56.8 crore farmer applications have been enrolled and 23.2 crore farmers received the claim.
Note: *- New Business Premium Value is for 2024.
