What Is Driving Growth in Insurance?
A report by Swiss Re projected India’s total insurance premiums to grow by 7.1% over a span of five years from 2024 to 2028 which was significantly above the global forecast of 2.4%. Given the pace India is currently going, the report suggests that India might become the fastest growing insurance sector of the G20 countries[1].
Economic Growth
Following the liberalisation of insurance in 2000, 70% of the market share is constituted by life insurance which has proven a stable growth as opposed to the entire insurance sector. With the liberalisation, a lot of private players found their entry into the segment and introduced a variety of products[6].
Growing Middle Class
The rise in disposable income and a growing middle class has been a key factor in the growth of the insurance sector. In India, rising healthcare costs and the aftermath of the COVID-19 pandemic, has led to more awareness among the middle class. This has resulted in a huge number of them opting for insurance cover[3].
Innovation
There have been many transformations the insurance sector has undergone after the pandemic. Earlier, the industry was more reliant on offline channels such as corporate agents, brokers or banks. Now, with rapid digitalization, consumers are able to access insurance via multiple channels online. These new developments have prompted growth and innovation in insurance product offerings and the adoption of emerging technology like artificial intelligence. Innovation pushes insurers to stay relevant in changing times[2] .
IRDAI and Government Support
Simplification of regulatory processes and support from government schemes have played a major role in boosting growth for insurance. Insurance Regulatory and Development Authority of India (IRDAI) has introduced many relaxations so smaller players are able to enter the market and increased focus on risk-based capital (RBC) norms to make sure insurers have a stable financial position and resources to withstand risks[4] .
As for government schemes such as Pradhan Mantri Suraksha Bima Yojana, Ayushman Bharat, Aam Aadmi Bima Yojana, among others are providing insurance cover to marginalized sections of the society[4].
Insurance Growth: Statistical Analysis
The Global Picture
As of 2022, India is the 10th largest market in the world and its total premium volume in 2022 was at $131 billion, a surge of 6.5% year-on-year[5].
Life Insurance thrives
It is life insurance in the whole sector that takes precedence over other offerings. Life insurance accounts for over 70% of the market share and has seen stable growth since the liberalization of the market. In FY23, life insurance companies attracted 18% more premiums as compared to last year[2]. The entry of many private players in the market has led to intensified competition and more products in the market[6]. In the period between 2024-28, life insurance premiums are expected to go up 6.7%, owing to factors of rising demand for life cover, India’s young population and growing adoption of InsurTech, says a Swiss Re report[1].
FDI In Insurance
By raising the FDI limit to 100% in insurance*[7], it is expected to welcome an influx of global players into the market who will not need to partner with a local company. By easing up restrictions, it will mean more competition, exchange of technology and knowledge, and more long-term capital. In the past nine years, India has received FDI worth nearly Rs 54,000 crore ($ 6.5 billion)[2].
Insurance Sector: Challenges to Consider
One of the biggest challenges faced by the industry has been low penetration. This can be attributed to low awareness about insurance cover and rural markets’ resistance due to economic factors[8]. Insurance penetration and density are two metrics used to assess the growth of this sector. The sector’s penetration rate has slipped from 4.2% in 2022 to 4% in 2023, highlighting that its growth is not at par with the country’s economic growth[3]. However, there has been steady growth in density, with life insurance displaying a density rise from $44 in FY15 to $70 in FY23[6].
Opportunity for Insurers
India, which is the 5thth largest life insurance market, has 57 insurance companies of which 24 companies are life insurance[2]. With increased FDI and simplifying of regulations in Budget 2025,* [9]the insurance industry can use this chance to launch innovative products, explore more distribution channels, adopt new technology to stay relevant to the dynamic requirements of the market. More products and more players will also translate into more awareness and help increase penetration in rural and remote markets.
Conclusion
IRDAI and the government have introduced many reforms that help achieve India’s mission of ‘Insurance for all by 2047’. The reforms introduced in Budget 2025 are a reflection of the goal to ensure every citizen has insurance cover. The future looks promising for the sector as digital advancements and increased awareness will attract more customers and FDI will help India operate at global best standards.
References:
[1]https://www.swissre.com/institute/research/topics-and-risk-dialogues/economy-and-insurance-outlook/india-insurance-market-growing-fast-build-resilience.html
[3]https://www.mckinsey.com/in/our-insights/steering-indian-insurance-from-growth-to-value-in-the-upcoming-techade
[4]https://www.pwc.in/research-and-insights-hub/bridging-gaps-in-the-india-insurance-sector.html
[5]https://www.ibef.org/research/case-study/growth-and-overview-of-the-insurance-sector-in-india-a-comprehensive-study
[6]https://www.ibef.org/research/case-study/growth-and-overview-of-the-insurance-sector-in-india-a-comprehensive-study
[7]https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2098353
[8]https://www.business-standard.com/budget/news/budget-2025-100-fdi-insurance-penetration-density-lower-premiums-125020200472_1.html
[9]https://www.indiabudget.gov.in/doc/budget_speech.pdf
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