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The insurance industry in India is expected to reach US$ 280 billion by the end of 2020. Life insurance industry in the country is expected to grow 12-15% annually over the next three to five years.

Indian Insurance Industry Overview & Market Development Analysis

    Last updated on Mar, 22 2021

Indian Insurance Industry Report  (Size: 701.54 KB ) (January, 2021)

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

In India, the overall market size of the insurance sector is expected to US$ 280 billion in 2020.

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% to reach Rs. 2.13 trillion (US$ 37 billion) in FY20.

Overall insurance penetration (premiums as% of GDP) in India reached 3.71% in FY19 from 2.71% in FY02.

Life insurers reported 14% YoY growth in individual annualised premium equivalent (APE) in October 2020, compared with 4% YoY in September 2020.

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

In October 2020, health insurance witnessed an increase in premiums at Rs. 4,074.8 crore (US$ 553.93 million) compared with Rs. 3,840.6 crore (US$ 554.29 million), recording 6% growth on y-o-y basis. Retail health also witnessed a 30% increase in premiums to Rs. 1,982.6 crore (US$ 269.69 million).

Investments and Recent Developments

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

  • Companies are trying to leverage strategic partnership to offer various services as follows:
    • In December 2020, SBI General Insurance partnered with IntrCity RailYatri to offer bus travellers with domestic travel insurance. SBI General Insurance, under this partnership, will include a wide range of coverage, including accidental death, permanent complete disability and emergency evacuation.
    • In December 2020, ICICI Lombard General Insurance has partnered with Plum, India's fastest growing employee health insurance start-up, to reimagine and co-create India's first technologically backed group of health insurance products. ICICI Lombard and Plum plan to fix four key elements of community health insurance using new technologies such as real-time pricing, onboarding, programme administration and claims.
    • In November 2020, Bajaj Allianz General Insurance joined forces with Muthoot Finance to offer insurance on gold jewellery. This scheme is planned to provide insurance coverage for gold jewellery pieces for the latter’s customers at the time of closing of the gold loan and release of gold ornaments. As a loyalty programme, it will provide insurance coverage to Muthoot Finance's clients.
  • On December 02, 2020, the International Financial Services Centres Authority (IFSCA) obtained membership of International Association of Insurance Supervisors (IAIS).
  • The United Kingdom’s Financial Conduct Authority (FCA), the US’s National Association of Insurance Commissioners (NIAC); the US’s Federal Insurance Office of the US Department of Treasury Insurance (FIO); Singapore’s Monetary Authority of Singapore (MAS); and India’s Insurance Regulatory and Growth Authority of India (IRDAI) are some of the leading members of IAIS.
  • In November 2020, HDFC ERGO General Insurance Company and NSDL Payments Bank Limited, National Securities Depository Ltd (NSDL) Subsidiary, collaborated to offer customers a full range of general insurance products. This partnership intends to integrate NSDL Payments Bank's broad distribution network and HDFC ERGO's wide innovation pipeline to contribute to financial inclusion in the country.
  • In November 2020, Life Insurance Corporation of India launched its first software application, ANANDA, an acronym for ‘Atmanirbhar Agents New Business Digital App’ or the on-boarding process with the aid of the agent/broker to get life insurance policy through paperless module.

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% foreign direct investment (FDI) was permitted for insurance intermediaries.
  • In December 2020, Uttarakhand announced its plan to offer ‘COVID-19 Insurance Policy’ to international tourists. A proposal request has been submitted to the Union Tourism Minister, Mr. Prahlad Patel, to introduce special life insurance policies for foreign tourists.
  • On December 03, 2020, as a one-time measure, IRDAI announced that it has authorised up to 5% of the existing premium rates to change the base premium. This move was to ensure viability and longevity for smooth transformation of the existing goods.
  • In November 2020, in collaboration with PNB MetLife India Insurance Company, India Post Payments Bank (IPPB) announced the launch of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) for customers.
  • 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% 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.
  • In October 2020, the Andhra Pradesh rolled out free of cost crop insurance scheme for the state farmers.

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 the end of 2020. 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.

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 for December 2020 is Rs. 1 = US$ 0.014

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.

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