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Insurance Industry-Road Ahead


The Insurance Industry continues to be a major contributor to the national GDP, as an integral part of the robust Services Sector, and is crucial in supporting business by being a pillar of India's financial infrastructure.

The Insurance Industry continues to be a major contributor to the national GDP, as an integral part of the robust Services Sector, and is crucial in supporting business by being a pillar of India's financial infrastructure. According to the latest Economic Survey, insurance penetration in India grew from 2.3% in 2000 to 3.9% in 2013. This growth is a result of increasing life expectancy, savings and Private Sector employment, and rising financial literacy.

As a means to safeguard one's future, insurance is the business of selling dreams and investing in emotions. Examples of this are planning for a son's college fees or owning one's own home. Hence, trust in the insurer is critical to a consumer's decision to invest with them. Unfortunately, complex paperwork and calculations, delays and misselling may have weakened customer resolve and confidence.

The Last Few Years
Although CAGR growth for new business premiums was an amazing 31% between 2001 and 2010, it dipped to 2% in 2010-2012. Prudent fund management and responsive regulation have ensured that the life insurance industry continues to remain sustainable and expandable in the longer term. Promoting innovation, fair competition and limiting inefficiency, along with other external drivers of growth, will be the main strategies for increasing the volume of premiums underwritten.
 
Current Markets for a Non-Life and Life Insurance Company in India
The potential for further increasing penetration is huge as the overwhelming majority of India's population remains untapped. Keeping savings in the form of cash and jewellery is still the norm in many traditional Indian homes, and they need to be educated about better returns for their savings.

The Union Budget for 2015-16 declared a slew of measures to reach out to the unorganised sector and the rural citizen through the Jan DhanYojana for universal banking coverage and other state-sustained microinsurance and pension plans for this large category.
 
Challenges and Strategy
The private life insurance company in India also has great scope to serve this market by utilizing existing distribution channels, such as RRBs, bancassurance and microfinance.

Customer push can be implemented by a life insurance company in India through permutations of long term savings and protection plans. Customer pull will only come through increasing financial awareness, savings and disposable incomes.

Profitability has remained a major challenge for insurance firms but the industry is at a turning point at the moment. While 12 of the 23 life insurance companies in India reported profits after tax in FY10-11, for the rest, the breakeven point remains elusive. Operational costs have risen but the benefits of scaling up have yet to be realized. Industry supervision needs to remain focused on transparency and simplification.

Although insurers have done well in designing customer friendly and innovative products, the same spark is missing in applying the right mix of channels for distribution. Firms can no longer afford to stay rigid in their operations or distribution. People's lifestyles and buying habits will determine what model of marketing can be implemented but firms need to be careful in their choice of resources for the same purpose.