Snapshot

Insuring India

India offers $78 bn of annual additional life insurance premium opportunity over 2020-30

  • The insurance industry in India has 58 insurance companies, including 34 non-life insurers (25 general insurers, 7 standalone health, 2 specialized insurers). The insurance industry in India has witnessed an impressive growth rate over the last two decades driven by the greater private sector participation and an improvement in distribution capabilities, along with substantial improvements in operational efficiencies. 
  • Private Life Insurers are expected to grow their retail APE at a CAGR of over 17% between 2021-23, and new retail term premiums are expected to double in 5 years. The Private Non-Life insurance segment is forecasted to grow at 16% in FY22 and 14% in FY23. Standalone Health Insurers are expected to grow by over 25% in FY22 due to the increased focus on healthcare. 
  • The New Business Premium for Life Insurers has grown at a CAGR of 14% over FY14-20 led by the financialization of savings and new product launches, and the insurance industry size in India is expected to grow at 12.5% CAGR over the next decade 2020-30 led by specialized products such as protection and annuities
  • Non-life insurers have been able to post a modest growth despite the last financial year being a challenging year on account of the pandemic, the gross direct premiums for the segment grew at 5.19% with a total Gross Direct Premium Income (GDPI) of INR 1.98 tn ($27 bn) in FY21. The non-life insurance premiums are expected to bounce back with an estimated 14% growth in FY22 and 11% in FY23, led by private insurers and standalone health insurers.
  • $ bn

    Total Written Premium (Life Insurance)

  • $ bn

    Gross Direct Premium Income (Non-Life Insurance)

  • %

    Share of New Business Premium in Total Premium (Life Insurance)

  • %

    Share of Motor Premium in Total Non-Life Premium

Ayushman Bharat PM-JAY is the largest health assurance scheme  in the world and is funded by the Government. 

India is the 10th largest Life Insurance market globally

India is the 15th largest Non-Life Insurance market globally

Industry Scenario

India’s premium share in global life insurance and non-life insurance market was at 2.73% and 0.79% respectively, during 2019.

  • The total insurance penetration in India was at 3.76% in 2019 (life insurance 2.82% and non-life 0.94%) and the total insurance density in India was at $78 in 2019-20 (life insurance density: $58, non-life insurance: $19).
  • In terms of the size of insurance industry in India, the share of life insurance in total premium in India is 74.94% and the share of non-life premium is 25.06% (2019-20)
  • Life insurers recorded new business premium of INR 2.78 tn ($38 bn) in FY21 growing at 7.49% over the last year with private life insurers growing at 16.29%. Private Life Insurers account for 33.8% of the industry’s new business premium (FY21) with the rest being accounted for by the Life Insurance Corporation of India (LIC).
  • The Life Insurance Industry in India recorded a total premium of INR 5.73 tn ($81.3 bn) in FY20 witnessing a growth of 12.75% over the previous year and the private insurers accounted for 33.7% of total premium underwritten by the industry. New business premium contributed 45.25% of the total premium and witnessed a strong growth of 20.59% over FY19. 60% of the new business premium was derived from single premium with remaining 40% accounted for by first year premiums
  • The traditional (non-linked) products accounted for 85% of the total premium written in FY20 and share of ULIPs (linked products) in the total premium stood at 15%.
  • During the last year (FY20), life insurers issued 288.47 lakh new individual policies, out of which LIC issued 75.9% of policies and the private life insurers issued 24.1% of policies.
  • In FY21, non-life insurers (comprising general insurers, standalone health insurers and specialized insurers) recorded a 5.19% growth in gross direct premiums.
  • The market share of private sector companies in the general and health insurance market has increased from 47.97% in FY19 to 48.03% in FY20.
  • Motor insurance accounted for 34.1% of the non-life insurance premiums earned, followed by health insurance at 29.5%, in FY21 Post-Covid rising demand for personal mobility space is leading to a shift in vehicle ownership patterns and may create an opportunity for motor insurers
  • Health insurance witnessed 13.3% growth in GDPI in FY21, while fire insurance and liability insurance observed 28.1% and 16.4% growth respectively in the same period
  • Government schemes and financial inclusion initiatives shall have helped in driving the adoption & penetration across all segments. The government’s flagship initiative for crop insurance (PMFBY) has led to significant growth in the premium income for crop insurance, and now covers over 55 million farmer applications year-on-year. Even during the COVID-19 lockdown period, nearly 70 lakh farmers have benefitted from it, and claims worth INR 87.4 bn ($1.2 bn) were transferred to the beneficiaries.
  • AB PM-JAY is an entitlement-based scheme under Ayushman Bharat and is fully funded by the Government. It is the largest health assurance scheme in the world and aims at providing a health cover of INR 500,000 ($6,900) per family per year for secondary and tertiary care hospitalization to over 107 million vulnerable families (approximately 500 million beneficiaries).
  • The insurance regulator IRDAI has also undertaken various initiatives towards boosting the insurance penetration, such as permitting insurers to conduct video-based KYC, launching standardized insurance products and allowing insurers to offer rewards for low-risk behaviour.
  • Going forward, general insurance companies will be key beneficiaries of the opening-up of economies, especially with improved trade activity increasing demand for motor and health insurance. Strong growth in the automotive industry over the next decade is expected to boost the motor insurance market. Meanwhile, the life insurance sector will benefit from a steep yield curve, with low short-term rates and higher long-term rates.
  • Digital issuance and online channels are expected to witness continued growth, the share of web aggregators within digital insurance has been constantly increasing and web-aggregators currently originate 30-40% of digital insurance.
  • The total mortality protection gap in India stands at $16.5 tn (as of 2019) with an estimated protection gap of 83% of total protection need. This offers a huge opportunity to life insurers with an estimated additional life premium opportunity of average $78.2 bn annually over 2020-30
  • The retail protection sum assured is estimated to grow 8X by over 2020-30, implying 23% premium CAGR
  • India is the 2nd largest InsurTech market in the APAC region, accounting for 35% of the $3.66 bn capital invested in this region. The online individual insurance market opportunity is estimated to be $1.25 bn by FY25 more than tripling from $365 mn in FY20.
  • The growth of the insurance market is being supported by important government initiatives, strong democratic factors, conducive regulatory environment, increased partnerships, product innovations, and vibrant distribution channels.
  • The increase in the FDI in Insurance from 49% to 74% announced in the Union Budget (Feb’21) shall further help in driving increased penetration and coverage by enabling additional avenues for capital support required for the expansion of the insurance industry in India.
  • The recent pandemic has emphasized the importance of healthcare on the economy, and health insurance would play a critical role in the effort to strengthen the healthcare ecosystem.

GROWTH DRIVERS

  • Favourable Demographics

    Younger working population proportion & rise in nuclear family structures is driving insurance coverage

  • Government Programs

    Govt. initiatives such as PM-JAY, PMFBY, PMJJBY, PMSBY etc. are increasing insurance penetration

  • Motor Industry

    Strong outlook for motor vehicles market driven by personal mobility needs to further drive motor insurance penetration

  • Growing Household Savings

    Increase in formalization of household savings and awareness towards financial products

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FAQs

Frequently
Asked Questions

What is Health insurance?

The term health insurance is a type of insurance that covers your medical expenses. A health insurance policy is a contract between an insurer and an individual /group in which the insurer agrees to provide specified health insurance cover at a particular “premium”.

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What are the factors that affect Health Insurance premium?

Age is a major factor that determines the premium, the older you are the premium cost will be higher because you are more prone to illnesses. Previous medical history is another major factor that determines the premium. If no prior medical history exists, the premium will automatically be lower.  Claim free years can also be a factor in determining the cost of the premium as it might benefit you with a certain percentage of the discount. This will automatically help you reduce your premium.

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Whether insurance policies issued to Non-Resident Indians, where the premium is paid through the Non Resident External Bank account, will be ‘export of services’?

No. The amounts paid from the Non-Resident External Accounts are paid in Indian Rupees and are not received in convertible foreign exchange. Therefore, the conditions for export of services as provided under section 2(6) of IGST Act, 2017 are not satisfied. Life Insurance services in such cases would be treated as inter-State supplies and subject to GST.

For more information, click here​.

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