Indian Insurance Industry Overview & Market Development Analysis

Introduction

The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in 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 direct premiums of non-life insurers in India reached US$ 20.33 billion in FY20 (up to December 2019), gross direct premiums reached Rs 410.71 billion (US$ 5.87 billion), showing a year-on-year growth rate of 14.47 per cent. 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.

In FY19, premium from new life insurance business increased 10.73 per cent year-on-year to Rs 2.15 trillion (US$ 30.7 billion). In FY20 (till February 2020), gross direct premiums of non-life insurers reached US$ 24.82 billion, showing a year-on-year growth rate of 14.03 per cent. Private sector insurers saw a 17 per cent growth in premium collection, the state-owned non-life insurers registered a nine per cent growth in the same period.

The market share of private sector companies in the non-life insurance market rose from 13.12 per cent in FY03 to 55.70 per cent in FY20 (up to April 2019).

Investments and Recent Developments

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

• The non-life insurance companies witnessed a rise of 14 per cent in their collective premium for April-February 2019-20.
• 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.
• As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo Munich Health Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
• In October 2018, Indian e-commerce major Flipkart entered the insurance space in partnership with Bajaj Allianz to offer mobile insurance.
• In August 2018, a consortium of WestBridge Capital, billionaire investor Mr Rakesh Jhunjunwala announced that it would acquire India’s largest health insurer Star Health and Allied Insurance in a deal estimated at around US$ 1 billion.
• India's leading bourse Bombay Stock Exchange (BSE) will set up a joint venture with Ebix Inc to build a robust insurance distribution network in the country through a new distribution exchange platform.

Government Initiatives

The Government of India has taken a 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) 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.
• Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2017-18.
• 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 grow 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 as on January 2020, Re 1 = US$ 0.01402

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.