Investment in Insurance Sector in India

Insurance Sector of India

Insurance is one of the most important and the fastest growing service sector in India. Initially Government was the major player in this industry but now in the post reform period, many private players both foreign and domestic have entered this sector. Insurance sector provides the investment opportunity of $4-5 billion in he next five years.

Facts an Figure

• The total size of insurance industry in India is about $10 billion (premiums). As compared to 2003-04 the insurance sector grew by 25% in 2004-05.
  
• The total premium collected in the life Life insurance was $5.8 billion in the year 2004-05. This amount was created from for 26.2 million policies. The registered growth was of 36% over 2003-04
  
• The other important segment of Insurance are Motor, marine, fire and health insurance. The premium collected from these segments in the year 2004-05 was $4.2 billion
  
  

Major Players In Insurance Sector


Structure of Insurance Sector
● Initially insurance industry was controlled by the government sector however, in 1999-2000 the insurance market was opened to private & foreign investment
● There are many foreign players who are doing business in this sector. Some of the major foreign players are: AIG, Aviva, MetLife, New York Life, Prudential, Allianz, Sun Life, Standard Life and Lombard. These foreign players are present with small stakes in joint ventures with Indian companies for both Life and Non-life segments
● The major market share in the field of Life Insurance is still dominated by Life Insurance Corporation (LIC). Life insurance corporation holds 78% share of the market
● In the case of non life insurance field, private sector companies both independently as well as joint ventures with foreign insurers account for 20% of the market and have grown at 60% p.a.

Major Players In Insurance Sector



Government Policy
● Government has permitted FDI up to 26% under the automatic route. The FDI is however subjected to to obtaining a license from the Insurance Regulatory and Development Authority (IRDA)
● As decided by the government this participation would be increased upto 49% in the near future
● Insurance sector is regulated by the Insurance Regulatory Development Authority (IRDA)

Business Potential and Opportunity

• Insurance market in India is lucrative market that is expected to grow with the average annual rate of 20%. The market is growing fast and the by 2010, the total market of the Insurance sector would be around $25 billion
• India has a huge population. World's 17% of the population resides here yet it is still 0.6% of the global insurance market. Nearly 80% of Indians still require Life, Health and Non-life insurance. The penetration of insurance is low. It is just 2.9% as compared to the world average of over 8%. Whereas, the penetration of Non-life insurance is even lower which is less than 1% in 2003.
• In 2004, the Per capita life insurance premium was $16 which is quite low as compared to the average world per capita life insurance premium which is around $292
  The robust economic growth and the increasing awareness of the risk factor have also contribute in the growth of this sector.