The insurance industry will continue to outpace the rapid economic growth to reach $350-400 billion in premium income by 2020, making India amongst the top 3 life insurance markets and top 15 non-life insurance markets by the year, a study said.
It stated that the total penetration of insurance (premium as percentage of GDP) has increased from 2.3% in 2001 to 5.2% in 2011. In addition, there has been a vast increase in the coverage of insurance. The number of life policies in force has increased nearly 12 fold over the past decade and health insurance, nearly 25 fold.
This progress has been aided by the dramatic shift in the availability of products, for example: better term, ULIPs, whole life, maximum NAV guarantee, auto assistance, auto pay per km insurance, disease management and wellness.
The report estimates the total insurance premium at approximately Rs. 17 lakh crore to Rs. 22 lakh crore in 2020 (with life being Rs. 15 lakh crore to Rs. 20 lakh crore). This massive growth will have a significant impact on India's ranking in the global insurance industry and is based on strong fundamentals. While the industry has come a long way over the past decade, the big challenge with the industry is profitability.
The report highlights the importance of insurance in India's economy, the progress made in the last decade, key challenges associated with the sector and an action agenda for insurance companies and the government.
Progress has been made on the channel front with the emergence of 5 distinct channels — bancassurance, broking, corporate agency, direct and auto dealers to complement the existing third-party agency and in-house salaried sales force.
Along with the emergence of multiple channels, the distribution reach has increased manifold, nearly 6-fold for life, and 1.5 times for non-life. During the same time, the Indian market has evolved from a monopoly to a truly competitive market, the study said.