The Indian insurance market is a huge business opportunity waiting to be tapped. The market currently accounts for less than 1.5% of the world’s total insurance premiums and about 2% of the world’s life insurance premiums. India is currently the 15th largest insurance market in the world in terms of premium volume and is expected to break into the top 10 markets by 2020 if current growth levels persist.
With a population of 1.3 billion, second only to China, India is expected to be the most populous nation by 2030. The country’s GDP which is currently at over US$2 trillion is likely to grow by 7.5% in 2015. This has drawn the attention of foreign investors to the market, including a number of insurance majors.
The Indian market currently consists of 53 players of which 24 are life and 28 are non-life insurers. GIC Re is the sole national reinsurer.
The life industry is one of the largest in the world with close to 360 million policies issued in 2015 and this is expected to increase at a CAGR of 12-15% over the next five years. The non-life industry meanwhile is currently writing premiums of $13 billion per annum, with the growth in the last one year at 17%.
The country’s total insurance market (ie both life and non-life) is expected to quadruple in size over the next 10 years from its current size of $60 billion.
FDI to benefit industry
The FDI in the insurance sector more than doubled during the first half of the current financial year to $341.43 million. As a result of the government increasing the FDI limit from 26% to 49%, a number of leading players have increased or are planning to increase their stakes in their JVs and prominent among them are Standard Life in HDFC Standard Life, Nippon Life in Reliance Life Insurance, AXA in both their life and non-life JVs with the Bharti group, Sun Life Financial in Birla Sun Life, AIA in Tata AIA Life, Bupa in Max BUPA health insurance and Munich Health in Apollo Munich Health Insurance.
Experts we spoke to say that a large and relatively young population, greater income levels and massive infrastructure development plans by the government will drive insurance penetration in the country.
Bright future for insurance
The future of the insurance industry definitely looks bright with a large population still not covered under any insurance scheme.
Insurers are increasingly adopting technology and are now connecting better with their intermediaries and customers. This has led to faster penetration into smaller and remote locations at lower cost.
Most technology driven insurers now manage many of their routine activities like policy issuance, renewals and claim settlement online. The life market will be driven by the large youth population who will see the need for protection and retirement planning.
The non-life sector will continue to be dominated by the motor and health portfolios and with the government’s thrust on financial inclusion and focus on infrastructure development, this segment will also see huge scope for growth and development.