Betting big on the domestic life insurance industry, CARE Ratings said the sector is likely to grow at 14 per cent to 15 per cent per annum.
In a research report released on Wednesday, it said the growth will come from a number of factors, including higher demand for retirement products such as pension and annuity, along with low availability of government-sponsored social security mechanisms and rising awareness of retirement planning and growing urbanisation.
The sector will also witness growth due to factors such as the younger ones in the demographic chart opting for pure protection plans, push to increase insurance penetration in rural areas, product innovations, rise of multiple channels, and continued tax benefits. “CARE further expects regulatory changes and government initiatives to aid in the further penetration of insurance products in the medium term,” it said, while highlighting challenges, including low income of individual agents, and low persistency ratio to continue to persist in the segment.
“These challenges would need to be addressed to improve the depth and spread of the industry,” it stressed.
The country’s life insurance sector accounts for about 75 per cent of the overall insurance premium. The total premium grew by a CAGR of 10.3 per cent in fiscal year 2017-18 to ₹4.58-lakh crore, from ₹1.56-lakh crore in FY2006-07. In contrast, the global life insurance industry grew at a CAGR of 0.8 per cent during the calendar years 2007 to 2017 and reached nearly $2.7 trillion in market size (insurance premium volume) in 2017, from $2.5 trillion in 2007, CARE said.
Some trends include expanding insurance distribution in rural areas, Indian companies expanding operations overseas, and increased online selling of insurance products.
However, frauds, high lapse-ratio, and unfavourable changes in macroeconomic factors, such as trade breakdown, unemployment, and uncertainties in the regulatory landscape could be characterised as key challenges to the industry growth.
[“source=thehindubusinessline”]