'Life insurance sector to see 12-15% CAGR over five years'

Life insurance penetration measured as percentage of insurance premium to GDP expected to growth to 5% by year 2020 from 3.2% now

The Life Insurance Council, the industry body of life insurers in India, has estimated the sector to record a compounded annual growth rate (CAGR) of 12-15 per cent over the next five years.

Life insurance penetration measured as the percentage of insurance premium to gross domestic product (GDP) is expected to grow to five per cent by 2020 from the current 3.2 per cent, according to the council.

“Life insurance industry has about 36 crore (360 million) in-force policies and is a high capital-intensive industry. With favourable demographics, new products launches on the anvil, industry expanding their operations and infusing efficiencies the industry will see significant growth in India,” said V Manickam, secretary general, Life Insurance Council.

The council said favourable Indian demography — insurable population, expected to grow to 750 million and life expectancy to 74 years by FY2020 — would help achieve spurt in the preference for life insurance. Thus, life insurance, which is the second most preferred financial instrument, would drive growth in net household financial savings to an estimated 35 per cent of total savings in the next seven years, compared with a meagre 26 per cent in FY10.

The council also estimated a potential foreign exchange inflow of $10 billion in the near term, when the foreign direct investment (FDI) in insurance increases to 49 per cent,.

According to the council, life insurers also plan to expand their distribution channel and increase the number of life insurance advisers to more than three million over the next five years and is expected to contribute Rs 3.5 lakh crore towards infrastructure projects by FY20. Assets under management (AUMs) of life insurers have risen to Rs 17.41 lakh crore as on March 31, 2013, compared with Rs 1.94 lakh crore in 2000-01.

Data from the council showed the total revenue from life insurers for 2012-13 stood at Rs 4.1 lakh crore, of which Rs 1.23 lakh crore was investment income, Rs 1.79 lakh crore was renewal premium and Rs 1.07 lakh crore was new business premium.

The total benefits paid to customers by the Indian life insurance industry in most challenging period, has increased to Rs 1.91 lakh crore as on March 31, 2013, compared with Rs 1.41 lakh crore in March 2011. In addition, there has been a marked improvement in death claims settled by life insurers in terms of the number of policies as also by the amount and the time taken to settle death claims.

 

Life Insurance Council asks for extension of new product guideline implementation deadline

Irda may not extend October 1 deadline

Life Insurance Council has asked the insurance regulator for an extension in the deadline for implementation of the new traditional product guideline. From October 1, life insurance companies cannot sell products that do not conform to the new product guidelines for traditional products.

 

V Manickam, Secretary General, Life Insurance Council said that after representation from the life insurers, they have proposed an extension of the October 1 deadline. He added that they expected a positive outcome from the Insurance Regulatory and Development Authority (Irda).

 

Meanwhile, Irda officials said that they are not looking to give any further extensions to enter the new product regime, since most life insurance companies have filed adequate products for re-filing. 

 

On October 1, all life insurers are required to be ready with their new bouquet of products to be available to customers. With the deadline merely 15 days away, life insurance companies are leaving no stone unturned to ensure that their products are out in the market on time.

 

Insurance Regulatory and Development Authority (Irda) bought out the traditional product guidelines in February this year, which mandated life insurers to be complaint with the new norms by October 1, 2013. Their existing products are being re-filed with the regulator.

 

However, life insurance experts said that several players have not been able to get their entire portfolio ready for customers. If they do not have the requisite number of products by October 1, they will have an incomplete set of products for customers.