India’s life insurance sector is expected to grow at a compound annual growth rate of almost 15% from 2015-2020, according to a new industry forecast report published by Timetric.
Life insurance is the largest segment of the Indian insurance industry, accounting for 79.2% of gross written premiums
The sector’s strong growth is down to a growing economy and higher disposable incomes for the population, and this growth is expected to continue in large part due to the low level of life insurance penetration 2015 which was 2.7% in 2015, compared to 3.29% in 2011.
The Life Insurance Corporation of India (LIC) – the state owned insurer – earned 72.6% of the life gross written premium in 2015. In fact, the strong brand awareness and identity created by LIC among Indian consumers has effectively made it a generic term for life insurance in India.
Nevertheless, there have been moves in recent years to liberalise the market. The major reform has been to increase the FDI limit in insurance from 26% to 49%.
This increase became effective from March 2015 last year and has enabled foreign insurers to have greater control over their Indian operations. It is expected to attract more insurers to a fast growing market. Aviva, Sun Life Financial, Axa, Dai-ichi Life and AIA Group are insurers that have chosen to increase their stakes in Indian joint ventures.
Direct marketing dominance
Direct marketing is the dominant distribution channel for the Indian life sector, accounting for 49.7% of new business direct premium in 2015.
This coincides with a slide in the new business market share of agencies, which fell from 46.6% in 2011 to 35.8% in 2015. This can be attributed in part to the number of agents falling from 2.36 million in 2011 to 2.08 million in 2015. Interestingly, the agent figures for LIC fell from 1.34 million to 1.08 million over the same period.