Indian life insurance sector logs 11% CAGR during 2017-22: Report

NEW DELHI: The Indian life insurance industry grew at a compounded annual growth rate (CAGR) of 11%, in terms of total premium and 17% in terms of new business premium, during 2017-22, according to a report by Benori Knowledge.

The global provider of custom research and analytics solutions estimated that the industry will grow at a CAGR of 9% until 2027.

Benori Knowledge also found that life insurance penetration rate in India rose to 3.2% in December 2021 from 2.8% in December 2019, almost on a par with the global average of 3.3%.

At 3.2 % penetration, India ranks 10th in the global life insurance market and ahead of China (at 2.4%) and the UK (at 3%).

This is expected to increase in the coming years due to multiple factors, which include changing consumer perception and realisation of financial security, easing of regulation regarding product approval and distribution, customisation in products, balanced channel mix, and digitalization efforts at company level.

“The instability of the covid-19 pandemic highlighted the necessity for consumers to invest in products that would increase financial security, one of them being life insurance,” Benori Knowledge said in the report.

To better understand consumer preferences towards life insurance, Benori conducted a snap poll to find that 70% of respondents claim financial safety for the family to be their primary motivator for purchasing life insurance.

About 91% of respondents said their perception of life insurance has changed, from being viewed as an investment to being for protection. Further, 55% said that they bought their policy through an insurance agent, while 23% purchased it online, including bank portals, web aggregators, and direct purchase through websites.

While the poll indicated the importance of the agent, insurance agencies took the second spot among distribution channels.

Bancassurance was the primary avenue for consumers to discover and purchase life insurance, making up 55% of the distribution share in 2022. The prevalence of bancassurance channel was attributed to consumer trust and pre-existing relationships with banking institutions, along with banks’ in-depth knowledge of their customers’ wealth, enabling them to provide products aligned to their customers’ needs.

The report also highlighted that insurance agencies‘ share in the distribution mix has been declining, falling from 30% in 2017 to 23% in 2022. The decreased growth in premium purchases via agencies is not being overtaken by the bancassurance segment, but rather direct-to-consumer (D2C) channels.

Commenting on the findings from the report, Ashish Gupta, co-founder and CEO of Benori, said, “The Life insurance industry has been on a phenomenal journey over the last two years and the changing ecosystem as well as the structural change in the customer perceptions has now created large headroom for insurance penetration.

Life insurance companies must work on leveraging advanced tech stacks like AI/ML and customer segment analytics to derive actionable insights from customer behaviour to serve a better-suited, easy to understand product line. Investments in these technologies will also aid in developing intelligent process automation that can significantly reduce underwriting errors. In order to achieve this, effective partnerships with emerging fintech/insurtech companies should be pursued.”