The insurance industry in India is a pool of insurance companies hedging insurance seekers against risk through the means of insurance contracts. The contract is an agreement between the insurer and the insured in which the insurer guarantees payment for an uncertain event, against a premium paid by the insured regularly as mentioned in the contract.
Insurance is a commodity formulated to empower you with a criterion of safety at least financially should a catastrophe happen. Life Insurance is precisely planned to ensure your legatee financially should you pass out one day. For investors, the insurance industry is a slow-growing industry as compared to other financial sectors.
Insurance Industry In India
The insurance industry in India has two major players namely LIC- Life Insurance Corporation Of India and GIC- General Insurance Corporation Of India. But the insurance industry in India contains 57 companies in total among which 24 are in the life insurance business and the other 33 are non-life insurance companies most of them are having international ties.
Amongst the list, LIC is the sole public sector company under life insurers in India, and there are six public sector companies in the no-life insurer companies. While GIC is the sole national re-insure performing in the industry properly. The chain has many players including brokers, surveyors, and third party administrators serving health insurance claims.
Insurance Industry Market Size In India
Insurance penetration in the economy has been pushed by the government since its inception. Gross direct premiums of non-life insurers in India in the financial year 19-20 alone reached 13.66 billion in FY20.
Gross direct premiums of non-life insurers in India reached $13.66 billion in FY20 (up to September 2019), gross direct premiums reached Rs 410.71 billion ($5.87 billion), showing a year-on-year growth rate of 14.47%. Overall insurance penetration (premiums as % of GDP) in India reached 3.69% in 2017 from 2.71% in 2001.
In FY19, the premium from new life insurance business increased 10.73% year-on-year to Rs 2.15 trillion ($ 30.7 billion). In FY20 (till July 2019), gross direct premiums of non-life insurers reached $5.7 billion, showing a year-on-year growth rate of 16.65%.
The market share of private sector companies in the non-life insurance industry in India rose from 13.12% in FY03 to 55.70% t in FY20.
The Government of India has taken several initiatives to boost the insurance industry in India. Some of them are as follows,
The government has allowed 100% Foreign Direct investment and abolished many restrictions on FDIs, as per the Union budget 2019-20. The government has also taken an initiative to provide for at most 100 million vulnerable families launched on September 16 under the National Health Protection Scheme. This has led to the proliferation of the Health Insurance sector in India by 50%. Over 47.9 million farmers were benefited under Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2017-18.
The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue redesigned initial public offering (IPO) guidelines for insurance companies in India, which are looking to divest equity through the IPO route. IRDA has allowed insurers to invest up to 10% in additional tier 1 (AT1) bonds that are issued by banks to augment their tier 1 capital, to expand the pool of eligible investors for the banks.
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Future Of Insurance Industry In India
The future looks promising for the life insurance industry in India, with several changes in the regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers.
The overall insurance industry in India is expected to reach $280 billion by 2020. The life insurance industry in India is expected to grow by 12-15% annually for the next three to five years.
Demographic factors such as growing middle class, young insurable population, and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.