Consolidation is inevitable in India's fragmented life insurance market, where there are currently 24 players, according to Mr Amitabh Chaudhry, Managing Director and CEO of HDFC Life.
With the large number of players in a sharply competitive and capital-intensive industry, “it is difficult to see how this industry structure will continue to sustain itself”, he wrote in an article in the Hindu Business Line.
He said that the industry is strongly polarised, with the top five players accounting for over 75% of the total market, and the next set of players finding it difficult to sustain themselves and differentiate themselves.
He said that consolidation would not be easy because of the ownership structures in the industry, “but something’s got to give”.
Commenting on macroeconomic prospects, he said that the broader economy is expected to pick up momentum. The industry has taken the adoption of the goods and services tax (GST) and the impact of demonetisation in its stride, and the growth story should remain intact. The trend of increasing financialisation of savings will contribute to the growth of life insurance.
Also, innovation on the products front, which the industry has been actively demonstrating, will make life insurance more attractive for customers.
About the outlook for 2018, he wrote: “I believe the year will be good for the industry overall if we stick to the basics. Simplifying products and the customer on-boarding process, focussing on protection products and staying customer-centric: these are factors in our control. If we do well on these fronts, we should remain fairly optimistic that the factors that are not in our control — like macro economic and regulatory trends — will play out to our advantage. We should stay the course and do the right things for our customers.”