Life insurance is where the life is!

There seems to be shift in favour of life insurance, in contrast with earlier rosy projections about general insurance. Every would-be insurer wanted to be in general insurance. Now the choice is life insurance.

According to industry sources, Allianz, which has tied up with Alpic Finance for general insurance, has now decided to start a life insurance venture. There are others in the pipeline, like GIO Australia, which is withdrawing from the Indian general insurance business so that its new parent AMP can run a life insurance business unfettered.

The reason is simple – size. The Life Insurance Corporation of India registers a premium of Rs.20,000 crore, double that collected by GIC and its subsidiaries. Also, LIC's claims experience is far better than GIC's.

According to projections made by Confederation of Indian Industry, life insurance premiums will grow to Rs 1,48,000 crore in 2009-2010 and the pension business to around Rs 14,000 crore.

It was earlier assumed that private players would exploit the immense potential offered by health insurance. But with life insurance companies ready to package a health insurance product with their life policies, a plain vanilla medical insurance policy is unlikely to make waves.

The other added attraction of life insurance is that a policy holder gets his money back at the end of the maturity period or his family gets the money on his untimely death. With a major chunk of the potential market, read health, targeted by the life insurance companies too, what is left behind for general insurers to fight over is fire, burglary, transit and other such insurance lines.

The hitch again here is the possible fall in premium rates because of competition. For instance, the fire insurance premium -- the most profitable product for the four government insurers -- is all set to be reduced, and motor insurance is really a drag on bottom lines.

The other likely problem that a new private general insurer would face is finding a re-insurer.