Insurance sector in India is poised to grow in the coming years. With very few listed players in the life insurance segment in India, it would be useful to know if these listed insurance players should be part of a diversified portfolio. Amir Shaikh explains…
India's life insurance sector is one of the newest sectors wherein three top private life insurance players have got listed on the bourses. The journey for the life insurance sector has not been smooth so far, with the sector witnessing an upswing only in recent years. The sector has shown improvement in growth and profitability, increasing protection and has been supported by rising equity markets.
The life insurance sector continues to remain in the growth zone structurally due to favourable demographics and increasing financialisation. However, in the near to medium term, there are risks that exists from regulatory changes. The regulatory changes can impact product structures, pricing and could end up denting profitability for the insurance providers. The changes, if any, may especially impact disproportionately higher pricing in credit protection. In such a scenario, should a listed private life insurer be a part of diversified portfolio?
Life insurance industry overview :
Life insurance sector in India has moved from a monopoly to a market-driven competitive sector. As of now, there are 23 private companies and 1 state-owned company operating in the life insurance sector. The way insurance products were distributed has changed. Bancassurance and online channel for distribution has replaced the agency channel.
With continuous product innovation, the value proposition for customers has improved and technology has taken the centre-stage to provide competitive advantages to the insurance providers.
The life insurance industry grew by 11 per cent in FY18, garnering ₹1,939 billion of new business premium as against ₹1750 bn in FY17. The growth rate for the private insurers was much higher at an impressive 24 per cent in individual business. For the group business, the growth was muted at 4 per cent. LIC grew by 13 per cent in individual business and 5 per cent in group business even as it retained the dominant position in the sector.
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September 17, 2018