The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.
Out of 33 non-life insurance companies, five private sector insurers are registered to underwrite policies exclusively in health, personal accident and travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialised insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance.
Government’s policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes are expected to catapult this key ratio beyond 4 per cent mark by the end of this year, reveals the ASSOCHAM latest paper.
The number of lives covered under Health Insurance policies during 2015-16 was 36 crore which is approximately 30 per cent of India’s total population. The number has seen an increase every subsequent year as 28.80 crore people had the policy in the previous fiscal.
During June 2016 to May 2017 period, the life insurance industry recorded a new premium income of Rs 1.87 trillion (US$ 29.03 billion. . The life insurance industry reported 9 per cent increase in overall annual premium equivalent in April-November 2016. In the period, overall annual premium equivalent (APE)- a measure to normalise policy premium into the equivalent of regular annual premium- including individual and group business for private players was up 16 per cent to Rs 1,25,563 crore (US$ 18.76 billion) and Life Insurance Corporation up 4 per cent to Rs 1,50,456 crore (US$ 22.48).
The following are some of the major investments and developments in the Indian insurance sector.
- New India Assurance filed the prospectus for initial public offering (IPO) in which it will sale a total stake of 14.56 per cent to raise around Rs 7000 crore ($1.07 Billion) and it plans to use the capital raised for supporting growth of its business and maintaining solvency levels.
- New York Life Insurance Company, the largest life insurance company in the US, has invested INR 121 crore (US$ 18.15 million) in Max Ventures and Industries Ltd for a 22.52 per cent stake, which will be used by Max for investing in new focus areas of education and real estate.
- New York Life Investments, the global asset management division of New York Life, along with other investors like Jacob Ballas, will own a significant minority ownership in Centrum Capital by being one of the leading global investors in buying the available 30 per cent stake worth US$ 50 million of Centrum Capital.
- Aviva Plc, the UK-based Insurance company, has acquired an additional 23 per cent stake in Aviva Life Insurance Company India from the joint venture (JV) partner Dabur Invest Corporation for Rs 940 crore (US$ 141.3 million), thereby increasing their stake to 49 per cent in the company.
The Union Budget of 2017-18 has made the following provisions for the Insurance Sector:
- The Budget has made provisions for paying huge subsidies in the premiums of Pradhan Mantri Fasal Bima Yojana (PMFBY) and the number of beneficiaries will increase to 50 per cent in the next two years from the present level of 20 per cent. As part of PMFBY, Rs 9,000 crore (US$ 1.35 billion) has been allocated for crop insurance in 2017-18.
- By providing tax relief to citizens earning up to Rs 5 lakh (US$ 7500), the government will be able to increase the number of taxpayers. Life insurers will be able to sell them insurance products, to further reduce their tax burden in future. As many of these people were understating their incomes, they were not able to get adequate insurance cover.
- Demand for insurance products may rise as people’s preference shifts from formal investment products post demonetisation.
- The Budget has attempted to hasten the implementation of the Digital India initiative. As people in rural areas become more tech savvy, they will use digital channels of insurers to buy policies.
The Government of India has taken a number of initiatives to boost the insurance industry. Some of them are as follows:
- Government of India launches Pradhan Mantri Vaya Vandana Yojana, a pension scheme which will provide guaranteed 8 per cent annual return to all the senior citizen above 60 years of age for a policy tenure of 10 years.
- The Union Cabinet has approved the public listing of five Government-owned general insurance companies and reducing the Government’s stake to 75 per cent from 100 per cent, which is expected to bring higher levels of transparency and accountability, and enable the companies to raise resources from the capital market to meet their fund requirements.
- The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue redesigned initial public offering (IPO) guidelines for insurance companies in India, which are to looking to divest equity through the IPO route.
- IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds, that are issued by banks to augment their tier 1 capital, in order to expand the pool of eligible investors for the banks.
The future looks promising for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers. Insurance Penetration mark is expected to cross 4 per cent mark in the year 2017 as it has shown a continuous increase in the year 2014 and 2015 with market penetration rate of 3.3 per cent and 3.44 per cent respectively.
The country’s insurance market is expected to quadruple in size over the next 10 years from its current size of US$60 billion.
Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.
Exchange Rate Used: INR 1 = US$ 0.015 as on October 5, 2017
References: Media Reports, Press Releases, Press Information Bureau, Union Budget 2017-18, Insurance Regulatory and Development Authority of India (IRDA)
Disclaimer: This information has been collected through secondary research and Kohli & Kohli Law Associates is not responsible for any errors in the same