New Delhi: Just one out of three employed Indians has life insurance cover, leaving vast room for growth in a market that opened up eight years ago to non-government insurers, according to a report by research firm IIMS Dataworks.
(LIFE INSURANCE PENETRATION IN INDIA) About 105 million working Indians have life cover, said the report. Among the 216 million uncovered workers, about two-thirds are “highly unlikely” to think about buying an insurance plan either because they feel they can’t afford it or because they have an “active disinclination for various reasons”, it said.
That still leaves the remaining one-third workers for whom buying a first insurance policy is a possibility, and of these, nearly one out five, or 18%, plan to do so, said the report, based on IIMS Dataworks’ Invest India Incomes and Savings Survey 2007.
In addition, demand for life insurance continues to expand among existing policyholders who believe they are under-insured.
“In some states, as many as 40% of existing customers in 2007 believed this to be the case and as circumstances allow, they can be expected to buy more insurance,” IIMS Dataworks said.
India opened up the life insurance market to the private sector in 2000 by dismantling the monopoly of state-owned Life Insurance Corp. of India Ltd, or LIC, allowing joint ventures between local companies and foreign insurers, whose stakes were capped at 26%.
The market still remains underpenetrated. The size of the Indian insurance market is about 4.1% of gross domestic product, well below the global average of 6-9%, according to a report by consultant McKinsey and Co., which said the potential is immense.
The $40 billion (around Rs1.7 trillion) market is expected to grow to $100 billion, said the report.
LIC still remains the biggest life insurer in the country, although the private sector is increasing its market share as growing incomes and the absence of a social security system spur middle-class Indians to explore long-term savings plans.
“In a lot of ways, the pace of development has been faster than what we imagined in 2000,” said Shikha Sharma, managing director and chief executive officer of ICICI Prudential Life Insurance Co. Ltd, the biggest private sector life insurer. “The acceptance of private insurers has been very good,” she said.
As the reach of insurers’ sales and distribution channels extends further into both urban and rural areas, the customer base will “expand at a rapid rate as it has been doing in recent years,” IIMS Dataworks said.
“The life insurance industry has shown very healthy growth over the last seven years after deregulation,” said Anjana Grewal, senior vice-president (marketing and communication) at Birla Sun Life Insurance Co. Ltd.
“This has led to size of new business premiums being approximately Rs70,000 crore as of March. We expect to see the industry growing at more than 50-60% over the years.”