Life Insurance segment to record growth of 12-15% over the next 5 years

The Life Insurance Council, the industry body of life insurers in India, has estimated the life insurance segment of the insurance sector to record a CAGR of 12-15 per cent over the next 5 years.

This growth expectation is based on multiple regulatory and industry changes brought over in the past few years as well as the favourable demographics of the country.
Favourable Indian demography – insurable population, expected to grow to 75 crore and life expectancy to 74 years by FY 2020, would help achieve spurt in the preference for the life insurance segment.

Thus, life insurance, which is the second most preferred financial instrument, would drive the growth in net household financial savings to an estimated 35 per cent of total savings in the next seven years, as compared to meager 26 per cent in FY10.

The life insurance penetration measured as the percentage of Insurance premium to gross domestic product (GDP) is expected to grow to 5 per cent by year 2020 from current 3.2 per cent.

''The worst is over for the Life insurance industry that has not seen very positive growth figures in the past few years. With favourable demographics, new products launches on the anvil, industry expanding their operations and infusing efficiencies the industry will see significant growth in India,'' said V Manickam, secretary general, Life Insurance Council.

Life Insurance Council also estimated a potential foreign exchange inflow of $10 billion in the near term, when the FDI in insurance increases to 49 per cent, as proposed by the centre.

The increase in the permissible limit would bring in stable capital inflows and help the industry mature faster, Life Insurance Council says.

Life insurance industry stands to immensely benefit, with increasing distribution channels, especially in semi-urban and rural areas, with the accessibility to common service centres (CSC), considered as the cornerstone of national e-governance plan.

Currently, there are around one lakh CSCs, each of which serves a cluster of 6-7 villages, thereby covering close to 6.5 lakh villages across India.

IRDA has already issued guidelines to facilitate tie-up with CSCs and individual life insurance companies are in the process of sewing tie-ups with CSCs. The move will help Insurance Companies to open more outlets/offices in rural areas.

Recently, IRDA granted license to five repositories that are authorised to open e-insurance accounts. These accounts re expected to help safeguard policyholders to hold insurance policy documents in electronic format and also provide access to the insurance portfolio online.

Life insurers also plan to expand their distribution channel and increase the number of life insurance advisors to more than 30 lakhs over next five years and is expected to contribute Rs3,50,000 crores towards the Infrastructure projects by FY 2020.

The life insurance industry has witnessed spectacular growth in assets under mangement (AuMs), with investments that have been targeted towards deployment of funds enabling infrastructure growth in the country.

The AuMs of Life Insurers has risen to Rs17,41,175 crore as on March 31, 2013 as compared to Rs1,94,010 crore in 2000-01, a phenomenal growth of around 90 per cent.

The total benefits paid to customers by Indian life insurers in most challenging period, has increased to Rs1,91,336 crore as 31 March 2013 as compared to Rs1,41, 806 crore as on March 2011.

In addition, there has been a marked improvement in death claims settled by Life Insurers in terms of number of policies as also by amount and the time taken to settle death claims.