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Insurance Industry in India 2021


Here you get to know about Insurance Industry in India, Growth in Insurance Industry and Opportunities.

The Insurance Industry in India has seen major growth over the last two decades since it was liberalized in fiscal 2000. The sector is divided into two categories −

  • Life Insurance Industry
  • Nonlife Insurance Industry.

Insurance Industry in India

Both segments are governed by the Insurance Regulatory and Development Authority of India (IRDAI). There are 52 Insurance Companies; 24 dealings with Life Insurance and 28 plying in Non-Life Insurance Business in the Insurance Industry of India.

This chart shows Life insurance Penetration in India is the lowest among the other country.

Nonlife Insurance Industry

The non-life insurance sector offers financial protection for cargo, travel, health, motor vehicles, equipment, homes, and buildings, amongst others, against risks such as accidents, theft, damages, fire, and natural calamities. New products such as mobile insurance, cyber liability are being launched to meet evolving customer requirements.

The non-life insurance industry has grown at a CAGR of approximately 17% for the last 18 years. While the development has been impressive, there is ample headroom for further growth as non-life insurance penetration in India is about 0.93% against the world average of 2.80%. India’s favorable demographic dividend, with 65% of the population below the age of 35, is a strong driver of growth for the coming years.

Life Insurence Industry

The life insurance industry has evolved considerably catering to the changing macroeconomic landscape, customer needs, and technological developments. Today, there are 23 private companies and 1 state-owned company operating in the life insurance sector in India.

This is the chart that shows the Life insurance Industry penetration for the last 10 years from the year 2009 to 2018. Life insurance has the highest penetration in the year 2010 at 4.6% and lowest in the year 2014 with 2.6%

Life insurance Industry Penetration and density

The life insurance density is also shown in the chart from the year 2009 to 2018 which is given in US$.

The life insurance industry has undergone several changes which include the introduction of new regulations

  • Protection of policyholders’ interests (2002),
  • licensing of corporate agents (2002),
  • linked products circular (2010),
  • linked and non-linked products (2013),
  • registration of corporate agents (2015),
  • management of expenses (2016) among others.

This has led to a recalibration of the distribution models along with the rebalancing of the product mix. Technology has been a key enabler and has played a key role in improving customer experience in onboarding and service.

During FY 2019, the life insurance industry grew by 11% to garner Rs 2,147 Bn of new business premium against Rs 1,939 Bn in the previous financial year.

Life Insurance Private Sector

The private insurers posted a growth of 12% in individual business while group business saw a strong growth of 36%. LIC recorded a growth of 5% in individual business and 10% in group business.

However, private insurers continued to further consolidate market share in FY 2019 with the fifth consecutive year of greater than 50% share of the market. The market share of the private insurers has increased from a low of 36.5% in FY 2012 to 58.0% in FY 2019 based on Individual WRP. Key drivers of private sector growth within individual segments include the development of distribution channels, product innovation, digital transformation, and a focused customer-centric approach.

Private insurers with strong distribution tie-ups have outperformed their peers. The majority of the top 7 players have distribution arrangements with large banks, which has helped them grow faster than other players and dominate the private market. The top 7 players account for 76% of the private life insurance market on an individual WRP basis in FY 2019. These bancassurance arrangements are a combination of group-level partnerships and strategic alliances.

Opportunities in the Insurance sector

As per FICCI, India currently has 605 million people below the age of 25 and 225 million in the age group of 10-19 years. The insurable population is expected to touch 750 million by 2020 and life expectancy at birth to be 74 years.

The average Indian age by 2020 will be 29 years as against 40 years in the US, 46 years in Europe and 47 years in Japan. The proportion of population above the age of 65 years is expected to constitute 9% of the population by 2035 and 15% of the population by 2055, compared to 6% in 2015.

Opportunities in the Insurance sector

This provides a huge opportunity to tap the retrial space. Similarly, the proportion of the population between 20 – 64 years is expected to constitute 61% of India’s population by 2035 as compared to 56% in 2015. This provides an opportunity to pitch long term savings and investment plans.

As compared to other developed economies, India remains vastly under-insured, both in terms of penetration and density. The penetration of life insurance has increased from 1.5 percent in the year FY 2000 to 2.8 percent in FY 2018; with a high of 4.6 percent during FY 2010.

The ‘protection gap’ in India is amongst the highest in the world at 92.2% as of 2014, which has increased 4x in the last 15 years.

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