“We forecast that premiums will grow by an average 9% per annum (in real terms) over the next decade, stronger than the 7.5% annual average of 2015–2021. At this rate, India will be the 6th largest insurance market in the world by 2032, ahead of Germany, Canada, Italy and South Korea,” said a Swiss Re sigma report
“Our projection is based on expectations of strong economic growth, rising levels of disposable income, India’s young population, increased risk awareness and also digital penetration, and regulatory developments,” said the report
Mumbai:
India is one of the fastest growing insurance markets in the world. In terms of total premium volumes, it was the 10th largest globally in 2021. With an estimated global market share of 1.9%, it is now the second largest of all emerging markets, according to a new Swiss Re sigma report.
“We forecast that premiums will grow by an average 9% per annum (in real terms) over the next decade, stronger than the 7.5% annual average of 2015–2021. At this rate, India will be the 6th largest insurance market in the world by 2032, ahead of Germany, Canada, Italy and South Korea,” said the Swiss Re’s report“Global Insurance Report”.
“Our projection is based on expectations of strong economic growth, rising levels of disposable income, India’s young population, increased risk awareness and also digital penetration, and regulatory developments,” said the report.
At 1%, non-life insurance penetration (premiums as a percentage of GDP) in India last year was significantly below the global average of 3.9%. Growth in the non-life sector will be driven by demand for health covers, with people more aware of health security post COVID-19, and also strong support from a government-sponsored mass health programme (Ayushman Bharat).
Compulsory motor third-party insurance will also grow rapidly as India’s middle class continues to expand and buy more cars.
Life Insurance
Life insurance penetration was 3.2% in 2021, almost twice more than the emerging market and slightly above the global average. However, most life insurance products sold in India are savings-linked, with just a small protection component.
Hence households remain exposed to a large financing gap in the event of premature death of a main breadwinner.
The mortality protection gap in India stood at USD 17 trillion in 2019, (or 83% of total protection needed), one of the largest in the world.
In 2021, the government raised the level of foreign direct investment (FDI) in domestic insurers to 74% from 49%, and there are expectations that the level will increase to 100%.15 The increase to 74% already allows foreign insurers to further strengthen their
foothold in one of the fastest growing insurance markets in the world, with controlling stakes. The move will also facilitate greater access to capital, underwriting know-how and product innovation for the country’s insurers.
India’s largest life insurer, the Life Insurance Corporation of India, went public in May 2022, raising USD 2.7 billion in the country’s largest IPO to date.
Star Health and Allied Insurance, the largest private-sector health insurer in the country listed in December 2021,17 making it the fourth private sector insurer to IPO after HDFC Life, ICICI Lombard and ICICI Prudential.
Public listings will improve public disclosure, corporate governance and valuation. The insurance sector is highly competitive and is already witnessing M&A activity. Additional FDI capital inflows, IPOs and improved corporate valuations will likely further accelerate M&A activities in the sector.
Digitalisation
The digitalisation of Indian insurance market goes beyond telematics and customer risk assessment. A large number of digital platforms have emerged over recent years, offering a wide array of services, including insurance purchase. There are currently more than 110 InsurTech start-ups in India.
Funding in Indian Insurtech rose from just USD 10 million in 2016 to USD 800 million in 2021, accounting for almost 6.0% of the total global funding in the sector over the same period.
Policybazaar, Digit and Acko from India are among few InsurTech companies globally that had crossed the USD 1 billion valuation mark by 2021.