The year 2016 would go down in the annals of the Indian insurance industry history as the one in which the central government was the driving force in increasing non-life insurance penetration and awareness with various schemes, experts said.
The year also saw an acquisitive HDFC group with its non-life company HDFC Ergo General Insurance buying L&T General Insurance for Rs 551 crore ($81 million), while HDFC Standard Life is waiting for regulatory approvals for the acquisition of Max Life Insurance.
During the year, foreign partners of some insurance companies increased their stakes while the insurance regulator allowed setting up of branch offices by foreign re-insurers.
The non-life sector is expected to reap a bumper premium harvest of around Rs 18,000 crore from the Pradhan Mantri Fasal Bima Yojana (PMFBY), the new crop insurance scheme.
The major portion of the general insurance sector's growth is from crop insurance.
"It is one of the biggest positive impacts the industry is experiencing. Thanks to the new crop insurance, the miscellaneous insurance business portfolio of the general insurers was showing a growth of 25% in October 2016. Normally the portfolio would shows a growth of 5-10%," R Chandrasekaran, Secretary General, General Insurance Council of India, told IANS.
According to him, the crop insurance premium income is around Rs 10,000 crore till October 2016 for the industry.
The other innovative scheme of the central government that is increasing insurance awareness and penetration is the Rs 10 lakh accident insurance for railway passengers (initially for 92 paise and now free for tickets purchased online).
"All passengers who buy tickets online will get free insurance cover worth Rs 10 lakh," Finance Minister Arun Jaitley said recently. Jaitley said nearly 1.1 million passengers per day will be covered under the accidental insurance scheme as more number of people are expected to buy train tickets online.
He also announced that online payment for public sector insurance companies (life insurance and general insurance) will get 10% discount on general insurance and 8% discount on life insurance for new policies sold.
According to Chandrasekaran, the industry is expected to close the current fiscal with a total premium of around Rs 1,20,000 crore, up from around Rs 96,400 crore earned in the previous fiscal.
Queried whether the industry is in a consolidation phase with HDFC Ergo General buying out L&T General, experts replied in the negative and added that more new players are looking at the Indian market.
"The foreign partners of major players have increased their stakes in their Indian ventures. There is growth in the top line and hence there will not be any sellout," a senior industry official not wanting to be quoted told IANS.
He said 14 private non-life insurers have a premium income of Rs 1,000 crore and they are growing along with others. Many are also struggling due to competition.
"There is good growth opportunity and hence the existing promoters would stay put and may be foreign partners will increase their stakes. Companies that do not have a foreign partner may look for one," the official added.
According to Chandrasekaran, the concern for the industry is that underwriting losses (simply put premium income minus claims paid) not only continue to exist but the overall profitability is also under pressure due to competitive price pressures.
Further, all non-life insurers are adequately capitalised. Unlike the life insurance players needing regular doses of capital infusion to meet their expenses, there is not much of a need for heavy capital infusion for the general insurers.
The year also saw the issue of a nuclear liability insurance policy to Nuclear Power Corporation of India Ltd (NPCIL).
Queried whether consolidation in the industry is likely to be the trend, V Manickam, Secretary, Life Insurance Council, told IANS: "Few companies are looking to consolidate. But only time will tell if that is going to happen, as there is huge potential in this sector."
According to Manickam, the life insurance sector has grown exponentially this fiscal. "The new business premiums garnered by the industry is Rs 87,343 crore for April-October 2016, up by more than 30%, as compared to Rs 66,998 crore for the same period last year," Manickam said.
Listing out several regulations brought in by the insurance regulator, Manickam added: "We hear that the Authority (Insurance Regulatory and Development Authority of India) and its board has already cleared IRDAI's Regulation on Payment of Commission and Rewards Regulation, 2016."
"I believe implementing this regulation will be a challenge to the industry, if the regulator does not give the insurers sufficient time frame/window of six months to one year to change their systems, products and the like," Manickam said.
The year also saw ICICI Prudential Life Insurance coming out with a premium public issue and getting listed on the stock exchanges while foreign joint venture partners in some Indian life insurers hiked their stakes in their life insurance companies.