Ever since liberalization in the early 1990s, life insurance in India has seen significant growth. Between April 2015 and February 2016, new premium income of Rs. 1.072 trillion (US $ 15.75 billion) was recorded in the country, at a growth rate of 18.3%. Till the end of February 2016, growth of 14.1% was seen in gross direct premium at Rs. 864.2 billion.
Currently, India is the largest insurance market in the word, with about 360 million policies in action. The market is expected to grow at a CAGR of 12%-15% till 2020. The value of the industry is expected to grow to US$280 billion by the end of 2020, with a hike of 5% in the penetration levels.
The government’s approval for the increase in Foreign Direct Investment (FDI) from 26% to 49% means there will be more investments in the sector, leaving innovation as the only way to beat the competition.
Technology to Play a Key Role
Despite being the second most populous country in the world, India currently accounts for less than 1.5% of world’s total insurance and about 2% of world’s life insurance, which means there is a huge business opportunity waiting to be harnessed.
Use of technology at a breathtaking pace and the ever changing demographics will be important in deciding the fate of the industry. There is a greater appetite to involve consumers at the corporate level, which cannot be fulfilled using the traditional distribution methods. Insurance agencies are coming up with new ideas, such as surveys and questionnaires, for customers to provide them with the right product. More efforts are being put into engage the potential buyer and study their preferences. Social networks are also playing an important role in this.
Competition to Capture Rural Areas
More than 70% of India’s total population lives in rural areas and is yet to adopt the concept of life insurance. Their consumption pattern, choices and preferences have changed after the introduction of technology and the internet to rural areas. The concept of micro insurance has already been introduced for rural people, with low premium and high coverage.
New Distribution Channels
Policy providers are also changing with time and are adopting alternate channels of distribution. In the coming days, corporate agents, bancassurance partnerships and brokers are likely to act as catalysts for the sector. Innovation is again the key here and the new mantra is to come up with ideas that distinguish the insurer from its competitors.
At the same time, it will be important to keep a balance between traditional and modern models to survive at a time when a large part of the country’s population is yet to become familiar with technology.