Indian Insurance Industry Analysis - July 2018

Post liberalization, the insurance industry in India has recorded significant growth. The Indian insurance industry is expected to grow to US$ 280 billion by FY2020, owing to the solid economic growth and higher personal disposable incomes in the country. Overall insurance penetration in India reached 3.69 percent in 2017 from 2.71 percent in 2001. Gross premium in Indian insurance industry increased from Rs 3.2 trillion (US$ 49 billion) in FY12 to Rs 4.6 trillion (US$72 billion) in FY18 (up to December 2017).

The domestic life insurance industry registered 10.99 percent y-o-y growth for new business premium in 2017-18, generating a revenue of Rs 1.94 trillion (US$ 30.1 billion). In Q1 FY19, premium from new life insurance business increased 10.78 percent year-on-year to Rs 367.30 billion (US$ 5.48 billion).

Gross direct premiums of non-life insurers in India reached Rs 1.51 trillion (US$ 23.38 billion) in FY18. Over FY12-18, non-life insurance premiums (in Rs) increased at a CAGR of 16.65 percent. In April-May 2018, the gross direct premiums of non-life insurers reached Rs 24,397.09 crore (US$ 3.79 billion), showing a year-on-year growth rate of 11.96 percent.

There are 24 life insurance and 33 non-life insurance companies in the Indian market who compete on price and services to attract customers. There are two reinsurance companies. The industry has been spurred by product innovation, vibrant distribution channels, coupled with targeted publicity and promotional campaigns by the insurers. Private sector companies hold 48.01 percent market share in the general insurance segment and 28.93 percent market share in the life insurance segment.

The government has approved the ordinance to increase Foreign Direct Investment (FDI) limit in the Insurance sector from 26 percent to 49 percent which would further help attract investments in the sector.

In 2017, the insurance sector in India saw 10 merger and acquisition (M&A) deals worth US$ 903 million. Enrolments under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) reached 130.41 million in 2017-18. National Health Protection Scheme was announced under Budget 2018-19 as a part of Ayushman Bharat. The scheme will provide insurance cover of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable families in India.

Going forward, increasing life expectancy, favorable savings and greater employment in the private sector is expected to fuel demand for pension plans. Likewise, strong growth in the automotive industry over the next decade would be a key driver for the motor insurance market.

(This article was published on IBEF website, this article is just for information)