India's life insurance industry poised to enter $100-billion league

SNAP ANALYSIS
India's life insurance industry poised to enter $100-billion league
Commuters during the morning rush hour in Mumbai. The pandemic has ensured that a positive focus has been put back into the life insurance sector in India which is projected to grow into a nearly $100 billion segment by 2024 in terms of gross written premium (GWP).Courtesy: Reuters

Sector expected to grow at CAGR of 7%, driven by favourable demography and strong economic recovery in second half of 2021.

The onset of the Covid-19 pandemic and the resultant uncertainty has spurred a new wave of investments in the healthcare sector around the world.

One of the positive impacts has been on the life insurance industry in India, which is now projected to grow into a nearly $100 billion segment by 2024 in terms of gross written premium (GWP).

According to GlobalData’s revised India’s insurance forecast in the aftermath of the COVID-19 outbreak, the industry is expected to grow at a compound annual growth rate (CAGR) of 7.0% until FY2024, driven by favorable demographic factors and economic recovery expected over the second half of 2021. Accordingly, the sector is projected to grow from $81.4 billion to $98.5 billion by 2024 in terms of GWP.

Covid infections and related deaths from the pandemic has ensured that insurers are focusing on ensuring uninterrupted sales support and customer service.
Covid infections and related deaths from the pandemic has ensured that insurers are focusing on ensuring uninterrupted sales support and customer service.Courtesy: Reuters

Increased awareness

“A high number of COVID-19 related deaths in the last one year has increased awareness for life insurance in India. Easing of lockdown restrictions and increased adoption of digital distribution will further support the growth,” said Manisha Varma, insurance analyst at GlobalData.

With pick-up in vaccination drive, the Indian economy is expected to recover over the second half of the year. Increasing consumer awareness along with favorable demographics and regulatory environment will support the demand for life insurance policies.
- Manisha Varma, GlobalData

“Digital distribution got a much-needed push as insurers are focusing on ensuring uninterrupted sales support and customer service. Insurers are also offering new products with COVID-19 specific benefits to push sales. In January 2021, new business premiums grew by year-on-year 3.7% to $2.98 billion,” he said.

Benefits for other industries

The rapid growth of the Indian insurance sector has shown unexpected benefits in other industries too.

In a rare move, state-owned Life Insurance Corp. of India (LIC) has said it is weighing a bid for Zomato’s shares in the online food delivery platform’s initial public offering later this week. LIC, which typically invests in secondary markets unless the public issue is a part of the government’s divestment programme, is expected to bid for shares in the upcoming IPO of Zomato, the Mint reported, quoting sources familiar with the decision. “Zomato’s growth curve demonstrates how rapid India’s transition to the internet economy has been,’’ said one of the sources.

People flouting Covid-19 norms in crowded places. The government’s decision to increase the FDI limit in insurance from 49% to 74% has encouraged foreign insurers to enter the market and bring additional capital.
People flouting Covid-19 norms in crowded places. The government’s decision to increase the FDI limit in insurance from 49% to 74% has encouraged foreign insurers to enter the market and bring additional capital.Courtesy: ANI

Positive regulatory developments seen in the last six months have also helped strongly to support life insurance growth.

For instance, the Indian government’s decision to increase the FDI limit in insurance from 49% to 74% has encouraged foreign insurers to enter the market and bring additional capital. Additionally, in April 2021, the regulator permitted insurers to invest up to 10% of the outstanding debt instruments in a single Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) issue. The additional investment options will strengthen the financial position of insurers and encourage them to expand their product offerings.

Surge in interest among youth

According to Indian insurance market aggregator PolicyBazaar, the second wave of Covid-19 has seen a surge among young Indians aged between 25 and 35 buying term insurance policies. It said that there was a 30 per cent rise in insurance buying by those in the 25-35 age group during April and May at the peak of the Covid pandemic in India. Term insurance purchases on the website of online insurance aggregators, shot up by 70 per cent compared to March, the report said. It cited industry executives as saying that enquiries about insurance plans have rocketed even after the second wave infections have subsided because of the possibility of a third wave and the slow start to the vaccination programme.

INDIA'S INSURANCE INDUSTRY AT A GLANCE

  • The overall market size of the entire insurance sector in India is estimated at around $280 billion.

  • The life insurance industry is expected to increase at a CAGR of 5.3% between 2019 and 2023.

  • In terms of insurance density, India’s overall density stood at $78 in FY20.

  • The market share of private sector companies in the general and health insurance market increased from 47.97% in FY19 to 48.03% in FY20.

  • In the life insurance segment, private players held a market share of 33.78% in premium underwritten services in FY20.

  • In FY21 (until March 2021), premium from new business of life insurance companies in India stood at US$ 31.9 billion.

  • Gross premiums written of non-life insurers reached US$ 26.52 billion in FY21 (between April 2020 and March 2021), from US$ 26.49 billion in FY20 (between April 2019 and March 2020), driven by strong growth from general insurance companies.

  • In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by rising demand for health insurance products amid COVID-19 surge.

  • According to S&P Global Market Intelligence data, India is the second-largest insurance technology market in Asia-Pacific, accounting for 35% of the US$ 3.66 billion insurtech-focused venture investments made in the country.

“With pick-up in vaccination drive, the Indian economy is expected to recover over the second half of the year. Increasing consumer awareness along with favorable demographics and regulatory environment will support the demand for life insurance policies,” said Varma.

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