Insurance:
The US$ 41-billion Indian insurance industry is the fifth largest life insurance market in the emerging insurance economies globally, growing at 32-34 per cent annually. Life insurance in India has the First Year Premium (inclusive of Single Premium) segment accounting for US$ 24 billion and Non-Life Insurance—US$ 5.6-billion industry—with motor and health segments accounting for 56 per cent of total business.
Currently, there are 22 life insurance firms operating in India and as per industry estimates, the life category constitutes about 4 per cent of the total GDP in the country. The foreign direct investment (FDI) limit in the insurance space for foreign players is capped at 26 per cent—permissible under the automatic route subject to obtain a licence from the official regulator, Insurance Regulatory and Development Authority (IRDA)—but the government is planning to raise it to 49 per cent and a bill to give effect to the proposal is pending in the Rajya Sabha.
The life insurance industry has contributed more than four per cent to the country’s gross domestic product (GDP) since liberalisation and non-life’s contribution has been at 0.6 per cent for the last nine years.
SBI Life Insurance has been ranked the no. 1 life insurer across the globe, by the Million Dollar Round Table (MDRT) members. MDRT is an association of the world’s best life insurance sales professionals.
The country’s largest life insurance player, Life Insurance Corporation of India (LIC), is celebrating its 53rd anniversary week starting September 1, 2009 and has grown to 35.8 million policies and a sum assured of US$ 80.3 billion in 2008-09. It has collected US$ 325.27 million through alternate channels in the first four months of the current fiscal.
MetLife India Insurance became the first private sector life insurer to provide guaranteed monthly income along with other regular benefits like tax incentives and bonuses with the launch of ‘Met Monthly Income Plan’ in August 2009. MetLife has been among the top three fastest growing life insurance companies consecutively for the last 30 months.
Currently, there are at least 18 third party agents (TPAs) empanelled with the four PSU insurers. Insurers have also begun mulling setting up their own TPA mechanism to rectify the current weaknesses.
According a report by rating agency Care, public sector companies continue to dominate the general insurance market accounting for more than 58 per cent of market share. The four public sector general insurers—United India Insurance Company, National Insurance Company, New India Assurance and Oriental Insurance Company— were able to marginally increase their market share to 59.74 per cent from their combined market share of 59.4 per cent during April 2008-February 2009.
In June 2009, the general insurance industry grew at 7.4 per cent. Gross underwritten premiums (GWP) of the public sector insurers stood at US$ 319 million, up by eight per cent. The growth in GWP of private sector players was to the tune of 6.5 per cent at US$ 214.72 million. United India Insurance was the best performer, among public sector players, growing its business by around 17 per cent. New India Assurance grew at 8.5 per cent.
Overall growth in the life insurance industry remained moderate, with private insurers reporting a decline of 20 per cent in the category. They clocked US$ 1.12 billion during the first three months of the fiscal, while public sector player LIC posted a 20 per cent growth in first year premiums. Among the larger, Reliance Life is the only private player that has recorded a positive growth at 20 per cent in its first year premium collections. According to the data compiled by the insurance regulator, in June 2009, LIC’s new business premiums were up 10 per cent.
Cumulative assets managed by the private insurance players stood at US$ 31.7 billion as on June 30, 2009, while LIC managed over US$ 167.37 billion (March 2009).
Rural business:
According to IRDA guidelines, a certain portion of the life insurance company’s business must come from rural markets. LIC has a much wider rural foothold, with rural business accounting for nearly 40 per cent of the total, while the private life insurance companies have significantly increased their focus on rural business in the past two years.
Health Insurance:
Both life and non-life insurers provide health insurance schemes. There are currently over 30 health insurance products offered by as many insurance companies across India.
Sale of health insurance products in India registered around 30 per cent growth and garnered US$ 1.36 billion in terms of new premium collection for the year ended March 2009 owing to growing awareness and rising healthcare costs, as per IRDA. However, there is still huge potential for growth in the segment as currently the penetration of health insurance is at around 2 per cent of India’s 1.1 billion-population.
Tata AIG has launched a health product called ‘Hospicashback’ in early 2009. The product offers a guaranteed return of premium, irrespective of the claims of the customers besides paying customers fixed benefits for expenses such as hospital and ambulance charges.
In August 2009, Metlife entered the health insurance business with the launch of a new scheme ‘Met Health Care’, offering daily cash benefits in the case of hospitalisation. Customers can avail of the health insurance without undergoing any medical tests.
Bancassurance:
Bancassurance simply means selling of insurance products by banks. In India, the bank branch network encompasses nearly 75,000 branches inclusive of PSU and private banks. Close to 100,000 branches of co-operative, district co-operative and regional rural banks also exist. Normally, commercial banks act as a corporate agent and tie-up with one insurance company. Both Axis bank and HDFC bank are tying up with insurance companies vying for better share of the commissions.
Policy Initiatives:
To improve returns under the unit-linked insurance plans (ULIPS), the regulator has capped the amount insurance companies can charge the fund. Insurance regulator, IRDA, also tightened the guidelines by asking the insurance companies to ensure that no policies are issued to persons with fictitious names.
From June 2009, non-life insurance companies can neither reject the renewal of existing health insurance policies on the premise that claims had been made in the previous years, nor arbitrarily increase the premium while renewing cover. The grounds for such rejection have been made rare and exceptional, according to an IRDA circular.
Investment Scenario:
* Magma Fincorp is foraying into insurance business. The company has tied up with German insurance major, HDI-Gerling International Holding, to enter the general insurance sector in India, and will have an initial paid-up equity capital of US$ 22.65 million.
* Life Insurance Corporation of India (LIC) is looking at 25 per cent growth in new premium income in FY 2009-10, after it registered a growth of 69.33 per cent in the first premium collection in April 2009. It is also planning to invest US$ 8.23 billion in equities in 2009-10.
The Road Ahead:
According to the Investment Commission of India, the Indian insurance market is expected to be around US$ 52 billion by 2010. The compound annual growth rate (CAGR) is expected to be over 30 per cent per annum. The total investment opportunity is estimated to be US$ 14 billion-US$ 15 billion.
Further, according to a report ‘Booming Insurance Market in India (2008-2011)’ by Research and Markets, total life insurance premium in India is projected to grow US$ 253.2 billion by 2010-11. Total non-life insurance premium is expected to increase at a CAGR of 25 per cent for the period spanning from 2008-09 to 2010-11.