New Delhi: The expected slowdown in economic expansion will not affect the growth in general insurance sector, as market players are increasing the product lines to meet the growing demand, credit rating agency ICRA has said.
“Even though the economy is expected to slow, it has sufficient momentum to maintain an impressive rate of growth... Insurers operating in a now deregulated environment will be able to expand product lines to cater to the demand for more customised and sophisticated risk solutions,” the report -‘Indian General Insurance Industry Outlook´--said.
It said even if the tightening in credit led to a slowdown in consumer spending, the focused development of infrastructure will keep the economy going.
The report further said the penetration rate for property and casualty insurance in Asia in terms of premium as a percentage of GDP is very low. India is geographically large, having world’s second largest population.
This would eventually provide growth potential to the insurance industry, which is still in its infancy in India, the rating agency added.
During 2007-08, the general insurance sector grew at 12.53 per cent. The 14 non-life insurers collected about Rs 28,131 crore in premium in FY’08, against Rs 24,998 crore in the previous fiscal.
With the continuous revamping of infrastructure, the agency said, the growth in commercial insurance will improve and the number of private insurers will keep growing because of the continuous solid domestic demand.
As the Indian insurance sector moves rapidly toward international standards of free (risk-based) market pricing and newer products, foreign players are seeing opportunities to increase both volumes and types of products, the ICRA report said.
The rating agency said that coupled with other factors, rising income levels, availability of financing and change in lifestyles and aspirations are likely to sustain consumer demand over the next few years.
The insurers are thus optimistic about their product demand, it added.
However, ICRA has said that due to tough competition for new players, deregulation and moderation in returns from equity, the pricing will come under pressure and in turn profitability.
India ranks at the 5th largest market in Asia by premium, following Japan, Korea, China and Taiwan.