Indian Life Insurance industry biz among fastest growing worldwide: Assocham

India will continue to be one of the fastest growing life insurance markets with annual gross written premiums of Rs 2,680 billion set to grow by 13 to 14% and reach Rs 5,170 billion by 2015, industry body Assocham said today.

The country will contribute 10% of total global premium growth in this period and be one of the few major markets to grow at double digit rates, said The Associated Chambers of Commerce and Industry of India (Assocham).

The life insurance industry grew by 28% during 2000 and 2010 in new business premiums, 27% in annualised premium equivalent (APE) and 25% in gross written premiums, catapulting India to top ten markets globally.

“But the level of protection as measured by sum assured to GDP is about 55% relative to benchmarks in developed markets of 150% to 250%,“ said secretary general D.S. Rawat.

The relentless focus on growing new business premiums has led to several inefficiencies in business practices, he said. Creation of short-term products, incentivisation of front-line managers and agents primarily on new business and limited profiling of customer needs resulted in low levels of profitability.

Between September 2010 and March this year, the industry registered negative growth of 13% in APE. In the private sector, the negative growth was even higher at 32%. In the first quarter of 2011-12, the slowdown continued with the industry registering negative APE growth of 23% and private sector registering negative APE growth of close to 40%.

Going forward, the focus of industry will broaden beyond growth to include two important aspects which has been largely ignored in the past ��” providing long-term savings and protection to consumers, and driving profitability in the core life insurance business through sustainable business models.

Mr Rawat said the market is likely to witness continued regulatory action in line with trends which are being seen among regulators across the world. Secondly, the Indian consumer is evolving rapidly.

“Consumers are increasingly becoming multi-channel. Studies show over 80% of consumers across Asia use more than one channel across the purchase and usage process especially for buying insurance products.“

With India on the cusp of a digital revolution, mobile and internet driven transactions are estimated to grow three to four times over the next five years. So the paradigm for success is likely to change, driven by discontinuities in regulation, customer behaviour and technology adoption.

Emerging winners will have to redefine their business models with careful consideration to strategic issues around agency, bancassurance, innovation, geographic footprint and value of existing customer franchise.