India’s Life Insurance Market to Double in 5 yrs: McKinsey
The premium income of India’s life insurance market is set to double by 2012 on better penetration and higher incomes, consultancy firm McKinsey & Co said in a report.
The total premium could go up to $80-100 billion by 2012 from the present $40 billion as higher per capita income increases per capita insurance intensity, the report released on Monday said.
The average household premium will rise to 3,000-4,100 rupees from the current 1,300 rupees as will penetration by the existing and new players, McKinsey said.
India’s ratio of life insurance premium to its GDP is around 4% against 6-9% in the developed world. But, the report said, it could rise to 5.1-6.2 by 2012 in tandem with the country’s demographic profile. That Indians rank life insurance higher than other investment options for tax benefits and protection will also help, it noted. India has 17 life insurers and the state-owned Life Insurance Corp of India dominates the industry with over 70% market share, though private players have been growing aggressively.
Foreign holding in Indian insurance companies is limited to 26%. The government wants to increase the cap to 49%, but such a move is opposed by its communist allies. The report said the market should move beyond single-premium policies and unit linked insurance products which are easier to sell.
The agency model is the dominant sales channel accounting for more than 85% of fresh premiums but overall inactivity and attrition is much higher at 50-55% than the global average of 25%, McKinsey said. Opportunities include health insurance and pensions, the report said, adding only 1.5-2% of total healthcare expenditure in India was currently covered by insurance.
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