The Indian life insurance industry would continue to grow at around 11-13% over a three-to-five-year horizon on the back of prudent underwriting, high GDP growth, and rapid urbanisation.
After navigating a bumpy FY24 on account of various regulatory changes, the new business premium in FY25 is expected to rebound on a low base and the growth in total premium is anticipated to remain intact, as regulatory overhang would be in the rear-view mirror, according to a CareEdge report.
“The prime drivers of this growth include the entry of private players in the industry, a supportive regulatory environment, a substantial increase in group insurance products, product and process innovations, customisation, along with development of strong distribution channels including bancassurance in the individual insurance segment,” the report said.
Key challenges to industry growth include fraud, lapse ratio, any unfavourable changes in macroeconomic factors, and uncertainties in the regulatory landscape. Overall, the outlook is expected to be positive in the medium term, it said.
Growth over the years
The Indian life insurance sector has been growing at a compound annual growth rate (CAGR) of more than 11% over the past few years, which is faster than the average global growth rate. |
The prime drivers of this growth include the entry of private players in the industry, a supportive regulatory environment, a substantial increase in group insurance products, product and process innovations, customisation, along with development of strong distribution channels including bancassurance in the individual insurance segment.
Indian life insurance has a top-heavy market structure with the top five players holding over 80% market share and the remaining companies making up a long tail. There has been a shift in the channel mix from the earlier agency-focused model to a more diversified distribution mix with digital channels coming to the fore. Direct Selling is the largest channel in group business.
Meanwhile, even though the agency channel continues to be the largest segment in the individual business, bancassurance has grown rapidly to account for a 33% share.
Companies are expected to simplify the life insurance purchase experience and overall digital enablement further across the distribution channels. Further, with the planned introduction of Bima Sugam, distribution channels may face a disruptive period as it would be spread across the entire value chain enabling companies to serve consumers at potentially lower costs.
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