The Indian insurance industry is still at a nascent stage due to a number of reasons. Until its privatization in 2000, the industry was mainly driven by a handful of government-owned companies like Life Insurance Corporation of India. Today it is one of the most lucrative business options for banks and financial institutions with more than 50 recognised companies offering insurance services. The insurance industry is primarily driven by disposable incomes, lucrative offers and rates, government schemes, economic development and increased competition and product offering (IBEF, 2012).
Following are few of the most popular types of insurances offered in India today:
- Life insurance
- Health insurance
- Auto insurance
- Home insurance
- Medical insurance
- Travel insurance
The industry grew at an impressive rate of 24% during the first quarter of 2011-12, bringing the total number of insurances in force to 350 million. The life insurance segment itself is an estimated Rs. 2.9 trillion (as of 2011).
Health insurance is one of the most popular types of general insurances in India, constituting nearly 25% of the total share. It grew 21.3% the latter part of 2012 with total collections amounting to Rs. 1.36 billion (IBEF, 2012 Statistics).
Private companies are a major contributor to this growth due to the innovative product offerings and unique portfolio diversification. They also undertake aggressive marketing campaigns to influence consumer decision making.
Reasons for growth in demand
First and foremost, India is a developing economy with remarkable progress in almost every dimension like infrastructure, employment, education, health, income and thus, purchasing power. Rising awareness about protection of tangible and intangible assets and providing security to oneself has become imminent. Few of the factors responsible for growth in demand for insurances in India can be summarized below:
- Increased competition: Private and public sector companies are battling it out for more insurance buyers by offering newer product variants, higher interest rates, lower processing fees, etc. Growth, and not survival, is the key.
- Growing awareness: Consumers are being made aware of the need for insurance today. It has become a part of their academic curriculum and work life, where they are constantly being educated about the risks they are exposed to in daily life. Insurance has thus become a necessity.
- Government initiatives: The biggest leap taken by the Indian government in recent years is the privatization of this sector in 2000, over 150 years after the industry was established. The government is taking further corrective steps to fuel demand growth, such as setting up advisory groups to discuss industry dynamics, supporting plans for launching e-insurance and e-policies, etc. These steps are aimed at making access to insurance easier, even in the remotest parts of India
The road ahead
The Indian insurance industry is expected to touch Rs. 4.5 trillion by 2015, marking a compound annual growth rate of 14%. It is also expected to become the third largest market for insurance in the world, only next to China and Japan. Life insurance, Health Insurance and ULIPs are expected to be 3 of the fastest growing types of insurances for the next few years, due to many product offerings in this category.
- India Brand Equity Foundation (IBEF, February 2012). “Insurance”. [online]. Available at http://www.ibef.org/artdispview.aspx?in=40&art_id=31099&cat_id=801&page=2 Last accessed on 10th March, 2012.