Breaking boundaries: Insurance sector's promising shift

This would build on the momentum from the past 12 months, a period that saw the regulator give away three licences—the first permits since 2018. It could, in fact, mark the biggest licence issuance award for the industry since 2007-2008, when 10 licences were given.

Between 2012 and 2018, 11 licences were issued, all in the non-life space. It was only earlier this year that licences in the life segment were issued for the first time since 2011, to Acko Life Insurance and Credit Access Life.

Broadly, the insurance sector is divided into two segments: life and non-life. While the life segment accounts for about three-fourths of total premiums, it’s the non-life segment (such as auto and health) that is growing faster. In the past eight years, non-life has averaged annual growth of 13.5% in premiums, against 10.5% for the life segment.

Public to Private

Volumes are driving growth in the non-life segment. The number of new non-life policies issued, a measure of industry expansion, has increased from 105 million in 2013-14 to 266 million in 2021-22. That’s an average annual growth of about 12%. While non-life is the smaller of the two segments, it’s the one that is currently seeing more activity, experimentation and innovation.The insurance sector in India, in its current shape, is still relatively young. It was only in 2000 that, after decades of state ownership, the sector reopened its doors to private players. Private insurers have been steadily chipping away at the monopolies of state-owned insurers. They have been more successful in the non-life segment in doing so, as the numbers for share of gross direct premiums show. Between 2013-14 and 2021-22, the share of state-owned companies has dropped from 75.4% to 61.8% in the life segment, and from 55.8% to 40.8% in the non-life segment.

Stock Setbacks

One reason for this variance is the historic hold the Life Insurance Corporation, the state-owned life insurer, has had. With its wide physical presence, symbolized by its army of about 1.3 million individual agents, LIC acquired that exalted status of a noun becoming a verb. Some of that faith has eroded over the years.

The first blow was the whittling down of agent commissions on insurance-cum-investment plans, which were the growth staple for LIC and other life insurers. The second blow to LIC came when it offered its shares to the public in May 2022, and they under-performed miserably.In India, a public listing of insurers is something that has happened only in the past five to seven years. So far, eight insurers have gone public, including three state-owned ones. Six of them have been listed for at least five years, and the returns delivered by all of them during this period trail that of the broad market.

Long Haul

For state-owned insurers such as LIC, the listing imperative was to enable the government to raise revenues. For private insurers, a public listing symbolized their reaching some degree of scale and profitability, and providing exits to partners and investors. Insurance remains a business for the long haul. In 2021-22, about a third of life insurers and half the non-life insurers reported losses. In both segments, the top five insurers by net profit were defined by track record. In the life segment, other than LIC that has had historical heft, the other four top insurers by profits were all private players that started in 2000 and 2001. In the non-life space, some relatively younger companies appear. A disruption is on in the non-life space, with newbies such as GoDigit and Acko leveraging the online space. The next phase may unlock those possibilities further.

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