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28 March, 2024 20:24 IST
Financial Planning
   
Insurance Industry- Road ahead
Source: IRIS (19-JAN-15)

Life Insurance sector in India is the largest in the world with around 350 million insurance policies underwritten and is expected to register a compounded annual growth rate of 13-15 percent over the next five year period.

Statistically, the Life Insurance industry has been projected to grow at a rate of around 15% in the current fiscal vis-à-vis 3% of the last fiscal on the Annualised Premium Income. In FY2014, the industry clocked a NBP of Rs. 1.2 trillion and is expected to reach Rs. 1.4 Trillion in FY15.

The underperformance to the life insurance industry could be largely attributed to the realignment of the business structure by all insurers and intermediaries, with the major regulatory changes that were introduced during early part of this year. The other key hurdle to sustain a sound growth rate has been a highly tough operating environment.

If we analyse the overall growth of the life insurance industry for the FY13-14, we would realise that the only the LIC contributed to the positive growth by witnessing an 18% hike in the new business premium whereas the private players showed a dip of 4% in the NBP. The introduction of the new regulatory guidelines resulted in weakening of the top lines of many insurers during this fiscal and it has indeed impacted on the overall profitability of the insurance companies.

Persistency and having cost effective structure has become the key focus area of most of the insurers and profitability shall be attributed to those who adapt fastest in adjusting their business model to the dynamic regulatory environment.

On the other hand, the general insurance sector witnessed a decent and moderate growth rate of 14% CAGR vis-à-vis 13% in the last fiscal. The private players registered a growth of 14% in FY14 against a 10% growth registered by the PSU insurers. Though there has been a decline in growth rate of around 22% in the last few years to 14% in the last fiscal for the private insurers but the market share increased by a couple of percent in favour of private players that stands at 47% now.

The GWP of the GI industry was at Rs. 730 billion for FY14 and is expected to reach Rs. 830 billion by FY15. Around 75% of the business in the last fiscal was contributed by the Motor and Health segment that grew at around 16%. The sector that dipped in the GI sector was the Corporate that registered a growth rate of around 9% vis-à-vis a 12% growth rate the previous fiscal.

A decent growth in the economical conditions will result in the increase in the motor insurance that would be attributed to the growth in the auto sector.

Overall scenario and road ahead

Post the government clearing of the Insurance Bill, the industry expects a higher level of penetration in insurance distribution. India’s insurance population is supposed to touch a figure of around 800 million by 2020 and thus making it viable for the insurance companies to find out avenues and cost viable channels that can achieve the desired insurance penetration.

A lot of assistance is sought from the regulator is framing distribution friendly guidelines that can achieve a dual objective of protecting policyholders’ interest and simultaneously ensuring a congenial environment to provide the insurers and intermediaries for a sustainable and profitable distribution model.

(Contributed by Atrey Bhardwaj, Head-Insurance, Probus Insurance Brokers)


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