Indian Insurance Industry Overview & Market Development Analysis

Introduction

The insurance industry of India has 57 insurance companies - 24 are in the life insurance business, while 33 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

Government's policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes.

Gross premium collected by life insurance companies in India increased from Rs 2.56 trillion (US$ 39.7 billion) in FY12 to Rs 7.31 trillion (US$ 94.7 billion) in FY20. During FY12–FY20, premium from new business of life insurance companies in India increased at a CAGR of 15 per cent to reach Rs 2.13 trillion (US$ 37 billion) in FY20.

Overall insurance penetration (premiums as per cent of GDP) in India reached 3.69 per cent in 2017 from 2.71 per cent in 2001.

The market share of private sector companies in the non-life insurance market rose from 15 per cent in FY04 to 56 per cent in FY21 (till April 2020). In life insurance segment, private players had a market share of 31.3 per cent in new business in FY20.

Investments and Recent Developments

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

• Enrolments under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) reached 154.7 million till December 2019 since its launch.
• Over 53.8 million famers were benefitted by the Pradhan Mantri Fasal Bima Yojana (PMFBY) in FY20.
• In April 2020, Axis Bank acquired an additional 29 per cent stake in Max Life Insurance.
• In November 2019, Airtel partnered with Bharti AXA Life to launch prepaid bundle with insurance cover.
• In September 2019, Competition Commission of India (CCI) approved acquisition of shares in SBI General Insurance by Napean Opportunities LLP and Honey Wheat.

Government Initiatives

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

• As per Union Budget 2019-20, 100 per cent foreign direct investment (FDI) was permitted for insurance intermediaries.
• In September 2018, National Health Protection Scheme was launched under Ayushman Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable families. The scheme is expected to increase penetration of health insurance in India from 34 per cent to 50 per cent.
• 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.

The overall insurance industry is expected to reach US$ 280 billion by 2020. Life insurance industry in the country is expected to increase by 14-15 per cent annually for the next three to five years.

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.

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123

References: Media Reports, Press Releases, Press Information Bureau, Union Budget 2019-20, Insurance Regulatory and Development Authority of India (IRDA), Crisil

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.