Insurance Sector
  • The insurance density of life insurance sector
    05 Aug, 2014

    The insurance density of life insurance sector had gone up from USD 9.1bn in 2001 to USD 55.7bn in 2010. Similarly, insurance penetration had gone up from 2.15 per cent in 2001 to 4.60 in 2009, before slipping to 4.40 per cent in 2010 In life insurance business, India ranked 9th among the 156 countries, for which data are published by Swiss Re. During 2010-11, the estimated life insurance premium in India grew by 4.2 per cent (infl ation adjusted). However, during the same period, the global life insurance premium expanded by 3.2 per cent. The share of Indian life insurance sector in global market was 2.69 per cent during 2010, as against 2.45 per cent in 2009. The non-life insurance sector witnessed signifi cant growth of 8.1 per cent during 2010. Its performance is far better when compared to global non-life premium, which expanded by 2.1 percent during the same period. The share ofIndian non-life insurance premium in global non-life insurance premium increased slightly to 0.58 percent, thereby improvising its global ranking to 19th in comparison to 26th in last year.

    The insurance density of life insurance sector had gone up from USD 9.1bn in 2001 to USD 55.7bn in 2010. Similarly, insurance penetration had gone up from 2.15 per cent in 2001 to 4.60 in 2009, before slipping to 4.40 per cent in 2010. The number of insurance companies stood at 48 at the end of 2010-11, consisting of 23 life insurers, 24non-life insurers and a reinsurer. Edelweiss Tokio Life Insurance Company was granted registration in the year2011-12, leading to total number of insurance companies increasing to 49 as at end-September 2011.

    Registered Insurers in India

    There are forty-nine insurance companies operating in India; of which twenty four are in the life insurance business and another twenty four are in general insurance business. In addition, GIC is the sole national re-insurer. Of the forty-nine companies presently in operations, eight are in the public sector: two specialized insurers, namely ECGC and AIC,one in life insurance, four in general insurance and one re-insurance. The remaining forty one companies are in the private sector.

    Life Insurance

    Life insurance industry recorded a premium income of Rs 2,91,605 crore during 2010-11 as against Rs 2,65,447 crore in the previous financial year, registering a growth of 9.85 per cent. While private sector insurers posted 11.04 per cent growth (23.06 per cent in previous year) in their premium income, LIC recorded 9.35 percent growth (18.30 per cent in previous year). While renewal premium accounted for 56.66 per cent (58.60 per cent in 2009-10) of the total premium received by the life insurers, fi rst year premium contributed the remaining 43.34 per cent (41.40 per cent in 2009-10). During 2010-11, the growth in renewal premium was 6.22 percent (15.69 percent in 2009-10). By comparison, the growth in first year premium was higher at 15.00 per cent during 2010-11 but there is signifi cant decline in growth in comparison to the previous year figure (25.84 per cent in 2009-10).

    Market Share

    On the basis of total premium income, the market share of LIC declined marginally from 70.10 per cent in 2009-10 to 69.78 per cent in 2010-11. Accordingly, the market share of private insurers has gone up marginally from 29.90 percent in 2009-10 to 30.22 per cent in 2010-11. The market share of private insurers in fi rst year premium was 31.15 per cent in 2010-11 (34.92percent in 2009-10). The same for LIC was 68.85 per cent (65.08 per cent in 2009-10). However, in renewal premium, LIC had a higher share of 70.49 per cent (73.64 per cent in 2009-10) when compared to 29.51 per cent (26.36 per cent in 2009-10) share of private insurers. During 2010-11,life insurers issued 482 lakhnew policies, out of which, LIC issued 370 lakh policies (76.91 per cent of total policies issued) and the private life insurers issued 111 lakh policies (23.09 per cent). While LIC suffered a decline of 4.70 per cent (8.21 per cent increase in 2009-10) in the number of new policies issued against the previous year, the private sector insurers reported a signifi cant decline of 22.61per cent (4.32 per cent decline in 2009-10) in the number of new policies issued. Overall, the industry witnessed a 9.53 per cent decline (4.52 percent increase in 2009-10) in the number of new policies issued. The total capital of the life insurance companies as on 31st March, 2011 was Rs23,662 crore. During 2010-11,an additional capital of Rs 2,642 crore was brought in by the industry. The incremental capital during 2010-11 was brought in by the private sector insurers as there was no addition in the capital of LIC, the public sector insurance company.

    Non-life Insurance

    In the year 2010-11, 24 general insurance companies had been granted registration for carrying on non-life insurance business in the country. Of these, six are in public sector and the rest are in private sector. Of the private sector insurers, 3 have been granted registration to carry on operations in the health segment. Among the public sector companies, while the four public sector insurance companies carry on multiline operations, there are two specialised insurance companies: one for credit insurance (ECGC) and the other for crop insurance (AIC). Out of the 18 private sector companies, L&T General has been granted licence during 2010-11. The non-life insurance industry underwrote total premium ofRs 42,576 crore in 2010-11 as against Rs 34,620 crore in 2009-10, registering an impressive growth of 22.98 per cent as against an increase of 14.06 per cent recorded in the previous year. The public sector insurers exhibited impressive growth in 2010-11 at 21.84 per cent; over the previous year’s growth rate of 14.49 per cent. The private general insurers registered growth of 24.67 per cent, which is much higher than 13.44 per cent achieved during the previous year. The premium underwritten by 15 private sector insurers (other than the insurers carrying on exclusively health insurance business) in 2010-11 was Rs 17,425 crore as against Rs 13,977 crore in 2009-10. ICICI Lombard continued to be the largest private sector non-life insurance company, with market share of 9.99 per cent. It reported a marginal increase in market share up from 9.52 per cent in 2009-10. Bajaj Allianz, the second largest private sector non-life insurance company, which underwrote a total premium of `2,870 crore, saw decline in market share.from 7.17 per cent in 2009-10 to 6.74 percent during the year under review. Of the 15 private insurers, 12 reported an increase in premium underwritten and one insurer namely, Reliance General witnessed a significant decline in premium underwritten (reported a negative growth of 16.38 per cent).In case of public sector non-life insurers, all four companies expanded their business with an increase in respective premium collections. The market share of these companies, other than for National, however, declined from their previous year respective levels. National underwrote a premium of Rs 6,221 crore in 2010-11 as against Rs 4,625 crore in the previous year, which helped to improve its market share to 14.61 per cent in 2010 11 (13.36 per cent in the previous year). It reported growth of 34.50 per cent, which is higher than the industry average for 2010-11. New India, with insurance premium of Rs 7,097 crore, remains the largest general insurance company in India with market share of 16.67 percent.

    Segment wise premium

    The Motor business continued to be the largest non-life insurance segment with a share of 42.70 per cent (43.46 per cent in 2009-10). It reported growth rate of 20.82 per cent (12.83 per cent in 2009-10). The premium collection in Health segment continued to surge ahead at Rs9,944 crore in 2010-11 from Rs 7,311 crore of 2009-10, registering growth of 36.01 per cent. This resulted in increase in share of health segment to the total premium to 23.35 per cent in 2010-11 (21.12 per cent in 2009-10). The growth in the Health segment far out-paced the growth rate achieved by the non-life industry as a whole.The premium collection from Fire and Marine segments increased by 17.72 per cent and 16.20 per cent respectively in 2010-11 after remaining stagnant in 2009-10. The non-life insurers underwrote 793.41 lakh policies in 2010-11 as against 674.88 lakh in 2009-10, reporting an increase of 17.56 per cent over 2009-10. Public sector insurers witnessed major turnaround in the number of policies issued. They reported 16.52 per cent increase in number of policies issued during 2010-11 compared to 2009-10 (negative growth at -3.84 per cent). Similarly, private sector insurers reported growth in number of policies issued at 19.44 per cent (9.86 per cent in 2009-10).

    Investment Income: Non-Life Insurers

    The investment income of all non-life insurers during 2010-11 was Rs9, 382 core (Rs7, 682 core in 2009-10) registering a growth of 22.13 per cent.During the year under review, the investment income of both private and public sector insurers reflected an upward movement at 15.39 per cent and 23.55 per cent, respectively. During 2010-11, the net loss of non-life insurance sector was Rs1,019 crore. The public sector companies reported a net loss of Rs162 crore, as against private sector companies which collectively reported a net loss of Rs857 crore.

    Penetration and Density

    The potential and performance of the insurance sector is universally assessed with reference to two parameters, viz., Insurance Penetration and Insurance Density. Insurance penetration is defined as the ratio of premium underwritten in a given year to the Gross Domestic Product (GDP). Insurance density is defi ned as the ratio of premium underwritten in a given year to the total population (measured in USD for convenience of comparison). The insurance penetration was 2.32 per cent (Life: 1.77 per cent and Non-life: 0.55 per cent) in the year 2000 when the sector was opened up for private sector. It increased to 5.10 per cent in 2010 (Life: 4.40 percent and Non-life: 0.70 per cent). The insurance density stood at USD 64.4 in 2010 (Life: USD 55.7 and Non-life: USD 8.7) from USD 9.9 in 2000 (Life: USD 7.6 and Non-life: USD 2.3)

    Micro Insurance

    In an effort to ensure a balanced and speedy expansion of insurance coverage in the country, the Authority had come out with a regulatory framework (Obligations of Insurers to Rural or Social Sectors, 2002). These regulations impose obligations on insurers towards the rural population - to sell a specified percentage of policies and underwrite specified percentage of gross premium underwritten with respect to life and non-life insurance companies respectively;and cover a specifi ed number of lives/assets belonging to people below poverty line or those pursuing certain traditional occupations. The Government of India set up a consulting group in 2003 to examine the existing insurance schemes for the rural poor; and on the basis of the group’s recommendations, the Authority issued IRDA (Micro insurance) Regulations, 2005. Consequent upon the notifi cation of these regulations, there has been a steady growth in the design of products catering to the needs of the identifi ed groups. The flexibilities provided in the Regulations allow the insurers to offer composite covers or package products. The insurance companies are now also offering already approved general products as micro insurance products with the approval of the Authority, if the sumassured and other features of the products are within the range prescribed for micro insurance.In the case of life insurance, the individual new business premium under this segment stood at 130 crore under 36.51 lakh policies in 2010-11.The same for the group business amounted to`155 crore premium under 1.52 crore lives. LIC contributed most of the business procured in this portfolio by garnering Rs123 crore of individual premium from 29.51 lakh policies and Rs138 crore of group premium. In case of non-life business, there are a number of products offered (e.g.Janata Personal Accident Policy, Gramin Personal Accident Policy, Cattle/Livestock insurance, etc.) by the non-life insurance companies targeting the lower income segment of the population.

    World Insurance Scenario

    As per World Insurance Report published by reinsurance major Swiss Re, the global insurance premium for the calendar year 2010 was USD 4339 billion, which is 2.7 per cent (infl ationadjusted) higher than USD 4109 billion reported during the previous calendar year 2009. The share of life insurance business was 58 per cent in total premium collection. While life insurance business collected USD 2520 billion as premium,the same for non-life business was USD 1818 billion. During 2010, the premium in world life insurance business increased by 3.2 per cent on the back of double digit growth (i.e. 13 per cent) in life insurance premium collection in emerging markets.

    During 2010, the global non-life insurance premiums rose by 2.1 per cent. In emerging Asia and newly industrialised countries in the region, the strong economic rebound pushed up non-life premium growth, while soft pricing continued to slow growth in Europe and the US, except in a few countries in selected lines of business. Consequently, underwriting results deteriorated further in 2010, despite average natural catastrophe losses and continuing reserve releases. Overall profi tability remained low, as capital gains on invested assets only partially offset low investment yields.

    Overall, the insurance industry has recovered well from the crisis. Demand for insurance in the emerging markets is expected to continue to grow strongly in the coming years. Ageingsocieties will provide ample opportunities for life insurers. However, insurers face a number of challenges ahead such as derailment of economic recovery which may be caused by an escalation of the European sovereign debt crisis or an oil price shock. Introduction of regulatory reforms like Solvency II may lead to overly stringent capital requirements which would undermine profitability and ultimately may pose a challenge before the insurers. Escalation of public debt crisis may wear away the assets of insurers in view of the fact that insurers hold sovereign debt and bonds issued by banks.

    The New India Assurance Company Ltd

    New India Is The Largest Non Life Insurance Company in India. With its Domestic Networkof 1039 Offices, including 28 Regional Offices, 389 Divisional Offi ces And 637 Branches. Its International Presence is in 19 Countries, having network of 9 branches, 7 agencies, 1 associate company and 2 subsidiary companies. New India has been rated A-(Excellent) By A.M.Best Company.