There is a vast untapped opportunity

Implications: 1.Life insurance is gaining popularity among Indians because of tax benefits and income protection it offers in a country where there is no social security. 2.Need for a hassle-free insurance product as majority of Indians live in rural areas.

Analysis:  With rising household incomes and a galloping economy, life insurance product is fast becoming a popular investment. Hitherto, the market has been dominated by the state-owned Life Insurance Corporation which has a stranglehold over the market with a 70 % share. But many private players alongwith foreign companies such as Munich Re are aggressively chasing the business. That Munich Re has come back a second time with a tie-up with HDFC, India’s blue chip company, is signal enough of the available opportunities.

India, with a population of over 1.1 billion offers a market next only to China. And with a well thought out plan of penetration the competition need never be cut throat. As of now there is room for any number of players. At a time when the market in industrialised countries is relatively saturated, India offers a market with a low penetration level, almost negligible levels.

The market for life insurance is being driven by affluent and aging population. With household incomes set to rise, life insurance premiums are poised for an exponential growth.

The general insurance market for motor, home and contents insurance is also set for an exponential growth. Increasing affluence and high disposable family incomes are seen as the key factors driving the insurance market. More number of cars translates to more motor insurance. In India, a minimum of third party insurance is compulsory. More disposable income means more savings and more families wanting to own a home and buy consumer goods. These demographics are slated to be around for decades to come.

However, a word of caution. Enter the market with a well thought out plan and tie-up with an existing organisation with a high penetration levels into rural India, because urban India is well covered. The next couple of years will see the entry of new players eager for a slice of the market. Then, in the absence of a well thought out strategy and products not tailored to the market, many players will struggle and get frustrated. And moreover competition in an over represented area may shrink fees. In the current scenario profit figures are still hazy.

But there is no need for gloom. All factors are in place for the insurance industry to blossom into one of the fastest-growing financial services markets in the world. The stage is set for exciting times in the next five years.