Indian Insurance Industry Overview & Market Development Analysis

India ranked 10th in life insurance 14th in non-life insurance in the world.

Advantage India

Robust
Demand

* The gross first year premium of Life insurers increased by 6.94% in 2021-22 until 31st January 2022, this was Rs. 2,27,188 crore (US$ 29.54 billion).

Attractive
Opportunities

* Insurance Regulatory and Development Authority of India (IRDAI) allowed insurers to invest debt securities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs); this is expected to provide more investment options for the country's emerging start-up ecosystem.

* Insurance reach is still low in India. Overall insurance penetration (premiums as % of GDP) was 4.2% in FY21, providing a huge underserved market.

Policy
support

* 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.

Increasing
Investments

* 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.

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Last updated: Oct, 2022

Insurance Industry Report

Jun, 2022

Introduction

India’s Insurance industry is one of the premium sectors experiencing upward growth. This upward growth of the insurance industry can be attributed to growing incomes and increasing awareness in the industry. India is the fifth largest life insurance market in the world's emerging insurance markets, growing at a rate of 32-34% each year. In recent years the industry has been experiencing fierce competition among its peers which has led to new and innovative products within the industry. Foreign Direct Investment (FDI) in the industry under the automatic method is allowed up to 26% and licensing of the industry is monitored by the insurance regulator the Insurance Regulatory and Development Authority of India (IRDAI).

The insurance industry of India has 57 insurance companies - 24 are in the life insurance business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. There are six public sector insurers in the non-life insurance segment. In addition to these, there is a sole national re-insurer, namely General Insurance Corporation of India (GIC Re). Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.

Market Size

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 1.0%. 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. In the first half of FY22, the life insurance industry recorded growth rate of 5.8% compared with 0.8% in the same period last year. The gross first-year premium of life insurers increased by 12.93% in 2021-22 to Rs. 314,262.42 crore (US$ 40.06 billion).

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, the 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 in the previous year. 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. Six standalone private sector health insurance companies registered a jump of 66.6% in their gross premium at Rs 1,406.64 crore (US$ 191.84 million) in May 2021, as against Rs. 844.13 crore (US$ 115.12 million) earlier.

According to S&P Global Market Intelligence data, India is the second-largest insurance technology market in Asia-Pacific, accounting for 35% of the US$ 3.66 billion insurtech-focused venture investments made in the country.

Investments and Recent Developments

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

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.
Companies are trying to leverage strategic partnership to offer various services as follows:
In November 2021, ICICI Lombard collaborated with Vega to provide a personal accident insurance cover with every online Vega helmet purchase to increase road safety awareness among customers.
In November 2021, ICICI Prudential Life Insurance partnered with NPCI Bharat BillPay, a subsidiary of National Payments Corporation of India (NPCI), to offer ClickPay feature to its customers.
In November 2021, the Competition Commission of India (CCI) approved HDFC Life Insurance’s acquisition of 100% shareholding in Exide Life Insurance. The move is expected to strengthen HDFC Life’s position in South India.
In November 2021, Willis Towers Watson acquired the remaining 51% shares in WTW India, taking the company’s holding in WTW India to 100%.
In November 2021, Acko, a digital insurance start-up, raised US$ 255 million in funds, taking the company’s valuation to ~US$ 1.1 billion.
In September 2021, ZestMoney raised US$ 50 million to enter new business opportunities in the insurance sector.
In August 2021, PhonePe announced that it has 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 FY21, LIC achieved a record first-year premium income of Rs. 56,406 crore (US$ 7.75 billion) under individual assurance business with a 10.11% growth over last year.
In India, gross premiums written of non-life insurers reached US$ 26.52 billion in FY21 (between April 2020 and March 2021), from US$ 26.49 billion in FY20 (between April 2019 and March 2020), driven by strong growth from general insurance companies.
In August 2021, ICICI Prudential Life Insurance tied up with the National Payments Corporation of India (NPCI) to provide a unified payments interface autopay.

Government Initiatives

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

In 2022, the Indian government plans to sell a 7% stake in LIC for Rs. 50,000 crore (US$ 6.62 billion). This is the largest initial public offering (IPO) in India.
In November 2021, the Indian government signed an agreement with the World Bank for a US$ 40 million project to advance the qualities of health services in Meghalaya, including the state’s health insurance programme.
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.
In August 2021, the Parliament passed the General Insurance Business (Nationalisation) Amendment Bill. The bill aims to allow privatisation of state-run general insurance companies.
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 will 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 June 2021, the government extended a Rs. 50 lakh (US$ 66.85 thousand) insurance coverage scheme for healthcare workers across India until the next one 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.
Under Union Budget 2021, fund of Rs. 16,000 crore (US$ 2.20 billion) has been allocated for crop insurance scheme.

Road Ahead

The future looks promising for the life insurance industry with several changes in the regulatory framework which will lead to further changes in the way the industry conducts its business and engages with its customers. Life insurance industry in the country is expected to increase by 14-15% annually for the next three to five years. The scope of IoT in Indian insurance market continues to go beyond telematics and customer risk assessment. Currently, there are 110+ InsurTech start-ups operating in India. These startups are expected to provide a major boost to the industry and help increase India’s insurance penetration which plays a crucial role in the overall development of the country. In the past, the Indian government has played a crucial role in increasing the scope of the insurance sector through various policies and schemes. This trend will continue in the further through schemes like the Pradhan Mantri Fasal Bima Yojana (PMFBY) providing crop insurance and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) providing life insurance coverage to the youth at an affordable price. Schemes like these coupled with India’s demographic factors such as a growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of the Indian insurance sector.

Note: Conversion rate used for August 2022 is Rs. 1 = US$ 0.013, *- New Business Premium Value is until October 2021, Renewable Premium Value in India is until March 2021 (FY21)

References:Media Reports, Press Releases, Press Information Bureau, Union Budget 2021-22, Insurance Regulatory and Development Authority of India (IRDA), Crisil