Opportunities and Challenges in the General Insurance Sector for the forthcoming year

May 30, 2012 - PRLog -- Introduction:
The General Insurance industry in India has been profitable and is expected to continue its upswing moving ahead. The penetration of non life insurance in our Country is only 0.7 percent compared to an approximate 5% penetration in developed countries. This surely is an indication of the tremendous potential of growth in this sector. By premiums India is the 5th largest market in Asia after Japan, Korea, China & Taiwan. As the 2nd largest country in terms of population, the low penetration level offers a huge long term growth potential with the Industry expected to grow at 15% to 18% CAGR for next 5 years. This growth translates into a market in the range of $20-25 billion.  

Opportunities

Auto: In terms of product lines, Auto Insurance and Health Insurance constitute nearly 65% of overall premiums. The automotive car market is poised to be India’s 4th largest in the world by 2015 with sales expectation of over 6mn units annually by year 2020.

Health: Health Insurance constitutes about 24% of general insurance market and has the fastest growing portfolio with a CAGR (6 yr) in excess of 30%. This portfolio is expected to report a CAGR in excess of 25-30% over the next 5 years.

Rural: The Rural sector is an upcoming segment with the Rural Consumable market expected to grow at 45% in the next fiscal   2011-12. Cattle and weather insurance are untapped areas which have the potential for the insurance industry to derive sizeable benefits. Insurance opportunity in the SME sector is expected to increase by 3 times in the next 2-3 years.

E-Commerce:
With a total population of 1.2 Bn, India currently has an internet penetration of 8.5% compared to 78% in the US. However with the current pace of growth in internet penetration via broadband and mobile, the number of internet users is expected to reach around 400 mn by 2015. With more and more customers likely to prefer buying and accessing services online, it is expected that the Indian e-commerce market will register an impressive rate of 47% to over USD 10 Bn by end 2011 and will continue to grow aggressively in 2012.





Challenges:

Distribution: In terms of distribution, Agency remains the primary and largest distribution channel; however alternate and direct channels are steadily gaining ground. Besides traditional channels of distribution, there is a great scope for New age channels such as e-commerce, telemarketing, mobile marketing, microfinance institutions. In order to increase penetration we should also be able to use existing distribution channels that already have a footprint which in turn can act as our borrowed distribution network. An example of such a distribution channel is the extensive postal network which has been successfully utilized in Japan.  

Third Party Motor Pool: Motor pool losses are estimated at a cumulated staggering loss of 1.12 billion dollars and its’ rise would continue to make a negative impact on the insurers’ profitability. In markets globally where the motor pool exists, they are run on a no-profit, no-loss basis; unlike our situation here where the pool is loss making and burdening the General Insurance companies. We believe that the IRDA is looking into this issue and we are hopeful of a quick and viable resolution.

Open Architecture: IRDA has proposed to divide the country into three geographical zones, potentially allowing banks to tie up with more than one life, one non-life and one standalone health insurance company in these zones. This could also give the insurance companies sustainable access for delivering their products to semi-urban and rural areas.
Additionally, further deregulation and detariffing in other general insurance products would allow insurers to price risk appropriately and increase profitability.


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