July 22, 2021

India’s life insurance market is expected to grow by 12-15 percent in the current fiscal year 2015-16. An Indian independent and professional investment information and credit rating agency ICRA Limited, has predicted this taking improved market scenario and the government’s push to improve insurance penetration into consideration.

Originally named Investment Information and Credit Rating Agency of India Limited IICRA India) said in its report, “India’s life insurance sector is expected to grow this fiscal on an annual premium equivalent (APE) basis compared to 9 % decline in previous fiscal 2015 on the back of improved capital market scenario, initial signs of improvement in economic indicators and stronger thrust by the government.
According to Mr. Karthik Srinivasan, senior vice-president and co-head-financial sector ratings, ICRA, the key structural drivers for the industry remain intact and an expected recovery in the economy would provide impetus to the India’s life insurance industry.

Mr. Srinivasan said that the agency is expecting a growth of over 15 % in the sector in the next few years as the operating environment improves.The agency reached to this finding after analysing the performance of 9 life insurance companies – LIC and 8 other private sector firms that collectively represent around 92 % cent of the market share.

The report said, notwithstanding the 12 % improvement recorded in the total new business premium (NBP) during the FY 2013-14, the industry de-grew by 5 %in FY2014-15 to Rs 1,131 bn. The decline in the NBP was on account of contraction in both single and regular premium segments.

NBP for private sector players rose by 18 % in FY 2014-15, while for the sole state-owned life insurance firm LIC it contracted by 13 % mainly due to decline in its individual business.
The report said, while agents remain the main drivers for business of LIC, the bancassurance channel is fast gaining ground as a key distribution and sales channel especially for the private sector firms.

The report also predicts capital inflows of $6-8 bn for the private sector life firms due to raise in FDI (foreign direct investment) ceiling to 49 % from earlier limit of 26 % in insurance sector.

“However, most of the private sector companies have comfortable capital scenario and do not require much funds. Moreover, it is also not clear as to how much of the funds from FDI will come to the insurance company and the parent company,” Mr. Srinivasan said.

On the general insurance side, the solvency ratio remains stronger for the public sector insurance firms compared to its private counterparts, he said.

The agency also estimates a capital requirement for the General insurance industry to be around Rs 60-195 bn over the next five years.

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