India a big market for Life Insurance industry

Implications:

1. Life Insurance Industry yet to penetrate the Indian market.
2. Life Insurance awareness at very low levels among population.
3. Scope for trying out different models to suit different segments of the population.

Analysis:  India is a very under-insured country and life insurance is turning out to be a very lucrative business. Insurance penetration levels are abysmally low at 2 % of the population. With a huge population of 1.1 billion there is a vast market out there ready to be tapped.

When economic reforms were thought of in India way back in 1991 one of the priority sectors for privatisation and reforms considered by the Government of India was the insurance sectors. Almost 5 years after the formation of the Insurance Regulatory and Development Authority (IRDA), the first licence to start insurance business was issued. Today there are about 15 life and non-life insurance companies operating in India for a population of 1.1 billion.

After Indian insurance market’s record-breaking growth in the first months of 2007, many international players are eyeing the life, non-life and health insurance market of India. A good number of companies have already applied to IRDA for licences such as HSBC, Future Generali Life Assurance, Future Generali India Insurance Company, Apollo DKV Insurance, Principal PNB Life Insurance, Universal Sompo General Insurance. Indian Banks and businesses are also welcoming foreign players as they are looking to diversify their businesses into the ever-growing and as yet untapped field of life and non-life insurance market. Meanwhile the German based re-insurance hotshot Munich Re, is planning to enter life and non-life, both insurance segments via its insurance company Ergo.

What is the current scenario ?

• Insurance penetration has increased from about 1.5 % to 2% of the population.
• Selling insurance is no longer a part-time job.For most consultants it is a full-time job.
• Although insurance is supposed to be solicited, competition is so severe, it is now being aggressively sold.
• Several innovative marketing avenues have opened up, like banking channels, departmental stores, telemarketing, mailers etc for marketing insurance.
• Presence of IRDA- industry watch dog.
• Premiums can be paid online.

Many insurance companies have registered 3-digit growth figures recently. For example, SBI Life has shown 210 % growth in its business last fiscal year and Life Insurance Corporation (LIC) grew by 118%. This has also led many analysts to aggressively evaluate the insurance companies.

Another business model that is fast catching up and becoming popular, is the combining of insurance and banking into a single entity known as bancassurance. Bancassurance has contributed substantially to the premium accretions of the financial players in the business. Bancassurance also raises possibilities of collaboration of multiple players for providing better insurance options.It works this way,one insurance company might tie-up with a bank having a presence in urban areas and another bank having a better reach in rural areas. Most importantly, it will generate new business opportunities for agents and would simultaneously provide reliable insurance cover to the population.

In altogether a twist of a different kind, recently, Bombay High Court ruled in favour of policy trading and allowing private players to trade policies in secondary market, which may be contested, by LIC in the Supreme Court. If favoured,this opens up immense possibilities.