Invest In India

Is the insurance industry set to spread its wings in India? How much can it grow? The segment is still very small and can expand prodigiously given the right conditions, say industry watchers.

When the insurance in India was reborn in 1999, modest projections were put forth for the fledgling private segment of the industry. Insiders suggested that in about a decade, the private firms should be able to capture between 10 -15% of the insurance market.

In reality, the industry came off the blocks fast, with private players touching 9% market share in the second year of operation itself. The changeover from a monopolistic structure to a competitive segment has been smooth and orderly. Though market leaders are still the huge public sector units, private carriers are becoming significant.

Today, over sixteen companies offer you life cover and more are waiting in the wings. You have a bewildering array of policies and plans to choose from. You face a barrage of aggressive advertising from the carriers. Ironically, in what can be seen as competitiveness, the public sector Life Insurance Corporation of India, the largest carrier in the country was pulled up by the Insurance Regulatory and Development Authority (IRDA) earlier this year for too much aggression in its advertising!

The segment is poised for tremendous growth, simply because there are still so many people to be insured. A few more reforms such as relaxation of the cap on additional cover, incentives for agents, more schemes for children and the elderly, and lifting of taxes on rural micro-insurance will accelerate growth. An increase in foreign participation to 49% or more will definitely energize the sector.

Life insurance in India is growing at about 30% annually and is estimated to be worth US$ 8 billion today. It is expected to cross the US$ 40 billion mark by 2010. Investor education and wider reach will take the life insurance industry higher than ever before.

Where is the insurance industry in India headed? Is plain vanilla life insurance losing out to ULIPs in the market? Is that a good trend? What about the common man who has little money to invest? Should he put some in life insurance?

(Sources: IRDA annual report 05-06, India Knowledge@ Wharton)