'Increasing insurance FDI ceiling to 49% will bring $10 billion foreign exchange inflows'
Life Insurance Council, the industry body of life insurers in India, has estimated India’s life insurance industry to record a compound annual growth rate (CAGR) of 12-15 per cent over the next five years. This growth expectation is based on multiple regulatory and industry changes brought over in the past few years as well as the favourable demographics of the country.
Favourable Indian demography — insurable population expected to grow to 75 crore and life expectancy to 74 years by fiscal 2019-2020 — would help achieve a spurt in the preference for life insurance.
Thus, life insurance, which is the second most preferred financial instrument, would drive the growth in net household financial savings to an estimated 35 per cent of total savings in the next seven years compared to 26 per cent in financial year 2009-10.
The life insurance industry is expected to record a CAGR of 12-15 per cent over the next five years and life insurance penetration, measured as the percentage of insurance premium to gross domestic product (GDP), is expected to grow from 3.2 to 5 per cent by 2020.
‘The worst is over for the life insurance industry, which has not seen very positive growth figures in the past few years. With favourable demographics, new product launches on the anvil, the industry expanding its operations and infusing efficiencies, it will see significant growth in India,’ said Life Insurance Council Secretary General V Manickam.
There will also be estimated foreign exchange inflows of $10 billion in the near term, when foreign direct investment (FDI) in insurance increases to 49 per cent, as proposed by the Union Government.
The increase in the permissible FDI limit will bring in stable capital inflows and help the industry mature faster.
The life insurance industry will benefit immensely with the increasing distribution landscape, especially in semi-urban and rural areas, with accessibility to Common Service Centres (CSCs), considered the cornerstone of the National e-Governance Plan.
Currently, there are around 1 lakh CSCs, each of which serves a cluster of six-seven villages, covering close to 6.5 lakh villages across India.
The Insurance Regulatory and Development Authority (IRDA) has already issued guidelines to facilitate tie-ups with CSCs and individual life insurance companies are in the process of sewing up such partnerships. The move will help insurance companies open more outlets/ offices in rural areas.
Recently, IRDA has granted licenses to five repositories that are authorised to open e-insurance accounts. These accounts will help safeguard policyholders to hold insurance policy documents in electronic format and also provide access to the insurance portfolios online.
Life insurers also plan to expand their distribution channels and raise the number of life insurance advisors to more than 30 lakh in five years and contribute Rs 3,50,000 crore towards infrastructure projects by financial year 2019-20.
The life insurance industry has witnessed spectacular growth in assets under management (AUMs), with investments that have been targeted towards deployment of funds enabling infrastructure growth in the country. The AUMs of life insurers has risen to Rs 17,41,175 crore as on March 31, 2013, compared to Rs 1,94,010 crore in 2000-01, a phenomenal growth of around 900 per cent.
The total benefits paid to customers by the Indian life insurance industry in the most challenging period has increased to Rs 1,91,336 crore as on March 31, 2013, compared to Rs 1,41, 806 crore as on March 2011. In addition, there has been a marked improvement in death claims settled by Life Insurers in terms of number of policies as also by amount and the time taken to settle death claims.