Mumbai: HDFC Standard Life Insurance Company, a leading Indian private insurer, aims to outpace the industry’s growth rate as rising incomes in the fast-expanding nation boosts demand for risk coverage.
Life insurance penetration in India is about 4% of gross domestic product (GDP), in terms of total premiums underwritten in a year, compared with 2.4% in China and about 13.5% in Britain.
Industry executives say the outlook remains bright in an under-insured, booming economy that the International Monetary Fund (IMF) has forecast would expand 9.7% in 2010.
“Things have started to look up. We will grow at a faster pace than the industry,” Amitabh Chaudhry, chief executive of HDFC Standard Life told Reuters in an interview late on Wednesday.
“There is a huge scope for increasing insurance coverage in the country,” he said, adding the company should break-even in 2011-12.
The joint venture between India’s top mortgage lender, HDFC, and Britain’s Standard Life, was one of the firsts to enter the business after India opened up the insurance sector to private and foreign players in 2000.
The company expects renewal premium, which accounts for more than half of its total premium income, to rise 37-38% in this fiscal year that ends next March, said Chaudhry, who joined the company in January this year.
Renewal premium rose 31% in the last fiscal year to Rs3,748 crore ($842 million).
New premium income should see a growth of 23-25% this year as it taps more customers, he said, up from about 20% last year.
Break-even, IPO plans
“If the premium continues to see the growth we are seeing and if we are able to manage the costs well, we should be able to break-even next year,” Chaudhry said.
It had posted a loss of Rs275 crore in the year ended March 2010, lower than Rs503 crore a year earlier and is expected to stay in the red this year.
Chaudhry said HDFC Standard Life could launch an initial public offering (IPO) in the second half of 2011 if an insurance bill, which proposes raising foreign holding in insurance firms to 49 percent from 26%, is approved by the Indian parliament.
“Our ability to do an IPO depends on the insurance bill (approval),” he said. “Provided everything else falls in place we should be able to do it in the second half of the next year.”
State-owned Life Insurance Corporation of India was once the only option for the world’s second-most populous country with more than a billion people.
Today, about two dozen players including ICICI Prudential Life Insurance, Aviva Life Insurance Company and Bajaj Allianz Life Insurance vie for a bigger share of the insurance market in India.
Asia will account for up to 40% of the global life insurance market’s growth over the next five years, according to a McKinsey study last year. China and India will represent about 70% of that growth, the study says.