Insurance Sector outlook in 2015 : Dun & Bradstreet
Globally, India ranked 40 in terms of insurance penetration and 79 in terms of insurance density during FY14. Given the under penetrated market in the country, there is scope for significant growth. The favourable demography, growing population base; increasing insurance awareness, the drive for financial inclusion & rising financial literacy along with rise in domestic savings are expected to fuel growth of the insurance sector in the coming years.
Regulatory developments such as passage of “The Insurance Amendment Bill” to govern the sector
The raising of the Foreign Direct Investment (FDI) limit from 26% to 49% in the sector will surge the flow of capital in the country from foreign partners’, boost perational efficiency & competition and aid in increase in insurance penetration. It will lead to enhancement of domain capital in the area of products and technology to facilitate growth of the industry.
The bill which as of Dec 2015 is in the parliament and if approved and implemented, will lead to significant foreign exchange inflow, increase in customer coverage in rural and semi urban areas and increase employment growth.
First year premium income of life insurers in CY14 governed by IRDA’s new product regulations.
The life insurance penetration in India stood at 3.1% in FY14. In CY13, growth in the life insurance business resumed with first year premium including single premium growing at a positive double digit rate of 10% after registering a deceleration during the previous two years.
However, during Jan–Sep 2014, the life insurance industry registered decline in first year premium income by 4.3% as IRDA enforced new product regulations aimed at increasing the benefits for policy holders from Jan 2014; thereby life insurance companies have come under a new regulatory regime since CY14 and can sell only new products.
However, given stable new Government at the Centre, improving business & consumer sentiments, stability & improvement in financial markets, the demand for insurance products such as ULIPs and pension products are expected to get a boost. Further, tax incentives for insurance products will support insurance demand. Overall, life insurance sector could see strengthening over the next few years on account of favourable demography, growing awareness, new product launches, and expansion of operations and supportive regulatory developments. The large untapped rural ‘un-insured’ population presents a significant growth opportunity. Insurers are expected to further expand distribution in rural areas for inclusive growth.
Low penetration level poses opportunities for long term growth in the non-life insurance segment
The Non-Life insurance industry in India has grown at an average growth rate of 23% during CY10-CY13 and has reached an annual gross premium underwritten (within and outside India)
at Rs 755 bn in CY13. The gross direct premium grew by around 9% in Jan – Nov 2014, compared with Jan – Nov 2013. Motor insurance segment continued to dominate the non-life insurance sector with the highest share of 43% in gross direct premium within India during Jan –
Jun 2014 followed by health insurance (25%) and fire insurance (11%). However, penetration levels of non-life insurance in India are low at 0.8% in FY14, highlighting potential for substantial growth in the non-life insurance sector. The non-life business in India is expected to strengthen on account of improvement in GDP growth and rise in income levels which would drive demand for non-life insurance products.
Sale of insurance through internet based channels is expected to grow
The mega-trend of digitization is expected to have an impact on the insurance sector in India due to greater penetration of smart phones and internet in the country. Sale of insurance through digital medium such as online sale channel and m-sites and mobile apps are expected
to see enhanced acceptance and growth. Going forward, a greater influence by digital channels is expected during either the pre-purchase stage, purchase or renewal stages. Insurance spending on IT is expected to rise moving forward as evolved technology led distribution will drive growth.