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India: The Next Insurance Giant

India: The Next Insurance Giant
  • Report price : $ 1 269
  • Publication date : April 2008
  • Length : 127 pages

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India: The Next Insurance Giant

Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and 3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is on the fulcrum of an ever increasing growth curve.

Insurance is one major sector which has been on a continuous growth curve since the revival of Indian economy. Taking into account the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. According to the latest research findings, nearly 80% of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subjected to weak social security and pension systems with hardly any old age income security. As per our findings, insurance in India is primarily used as a means to improve personal finances and for income tax planning; Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small--4-5%. This in itself is an indicator that growth potential for the insurance sector is immense. It’s a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion.

India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with companies continues effort to lure the customers with new product offerings. However, the market share of private insurance companies remains very low -- in the 10-15% range. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints.

In 2000, Indian insurance market size was $21.71 billion. Between 2000 and 2007, it had an increase of 120% and reached $47.89 billion. Between 2000 and 2007, total premiums maintained an average growth rate of 11.96% and the CAGR growth during this time frame has been 11.96%. It was one of the most consistent growth patterns we have noticed in any other emerging economies in Asian as well as Global markets.

Major Driving Factors
=> Growing demand from semi-urban population
=> Entry of private players following the deregulation
=> Rising demand for retirement provision in the ageing population
=> The opening of the pension sector and the establishment of the new pension regulator
=> Rising per capita incomes among the strong middle class, and spreading affluence
=> Growing consumer class and increase in spending & saving capacity
=> Public private partnerships infrastructure development
=> Dearth of innovative & buyer-friendly insurance products
=> Success of Auto insurance sector

Emerging Areas
=> Healthcare Insurance & Pension Plans
=> Mutual fund linked insurance products
=> Multiple Distribution Networks .i.e. Bancassurance

The upward growth trend started from 2000 was mainly due to economic policies adopted by the then Indian government. This year saw initiation of an era of economic liberalization and globalization in the Indian economy followed by several reforms and long-term policies that created a perfect roadmap for the success of Indian financial markets. On the basis of several macroeconomic factors like increase in literacy rate & per capita income, decrease in death rate and unemployment, better tax rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by $28.65 billion and reach $76.54 billion by 2011 with a CAGR of 12.44% and a growth of 59.82%.

The Indian life insurance market generated total revenues of $41.36 billion in 2007, this representing a compound annual growth rate (CAGR) of 11.84% for the period spanning 2000-2007. Life insurance market had a growth of $22.46 billion within a period of 7 years with a growth rate of 118.24%. Estimated life premiums rose from INR1,470,800 million ($36.77 billion) in 2006 to INR1,301,540 million ($32.54billion) in 2005. We envisage that life premiums in 2011 will be $65.96 billion, a growth larger than they were in 2007. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.78% for the four-year period 2007-2011 expected to drive the market to a value of $65.96 billion by the end of 2011. There would be a growth of $24.6 billion i.e. 59.48% in the next 4 years.

Non-life premiums in India were $6.53 billion in 2007. Gross written premium (GWP) in the Indian non-life insurance market reached a value of $5.75 billion in 2006, this representing an annual growth of 13.55% for the period spanning 2006-2007. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in 2006 to INR261 billion ($6.53 billion) in 2007. We anticipate that non-life premiums will grow by a CAGR of 9.40% between 2007-2011. We are looking for non-life premiums to rise by $405 million over the five years to the end of 2011 with a growth rate of 62.02%.

Topics covered in the report
=> Trend analysis of Indian economy and growing macroeconomic factors and
=> India’s position in the context of emerging countries
=> Historical growth trends & growth drivers of Insurance & its sub-sectors in India and outlook till 2011.
=> Market size of insurance sector (total, life & non-life) since 2000 till 2007
=> Market forecast of insurance sector (total, life & non-life) between 2007 and 2011
=> Key issues & challenges, major trends & opportunities
=> Government’s initiatives to promote & regulate the insurance market
=> Competitive landscape and market share of top players
=> And many more...

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