A look at the general insurance sector of India — Part 1
Evolution of general insurance in India and the possibilities for future
General insurance has come a long way from the turn of this century when India opened its doors to international insurance players. There has been much progress in the last 17 years but as they say, the best is yet to come. In this article we look at how the industry is transforming, major players, business acquisition channels, commissions and profitability. AskArvi is excited to be part of this rapidly evolving industry and by the end of article we hope you’ll see what we saw when we started our company :).
The players
There are a total of 31 general insurance players in India, 19 private sector insurers, 4 public sector, 5 standalone health insurers, 2 specialized insurers and 1 re-insurer. While all public sector insurers have been around since independence, private sector insurers have sprung up since 2001 after regulatory changes.
Most private sector insurance companies have entered into a Joint Venture with foreign partners. Here is a look of whose married to whom…
The market
Gross Premium
As of 2015–16, all insurers combined have underwritten gross premium of 99,333 crores. There has been a healthy growth of 12% over the last 3 years in gross premium.
Unlike life insurance sector that we analyzed in our previous post, general insurance is dominated by private players. Gross premium in percentage terms between private, public and standalone insurance companies is as follows:
A total of 12.2 crore non-life policies were issued in 2015–16, 45% of which were issued by private sector.
Market Penetration
For the people new to insurance sector, market penetration is determined using 2 metrics, insurance density and and penetration. Insurance density is ratio of insurance premium to total population and insurance penetration is ratio of premium to GDP.
For general insurance sector, insurance density is ~11.5 USD and penetration is 0.72%. This is significantly lower than the life insurance sector with a density of 43.2 and penetration of 2.72%.
General insurance as a consumer phenomenon is much less popular than life insurance.
When we compare these numbers with other countries, we can easily see that there is a long way to go in general insurance sector. Even countries such as Thailand, China and Malaysia have double the insurance penetration than that of India.
With a burgeoning middle class, a rapidly expanding internet savvy population and (hopefully) some innovative underwriting, India can easily double its insurance penetration.
Even doubling the insurance penetration, a moderate target, India would increase its gross premium base by 1 Lac crores in general insurance.
Business segments
Key business segments in general insurance are Fire, Marine, Motor, Health, Travel and Home. Health and Motor segments are the biggest and fastest growing segments accounting for 39% and 21 % of the total business and growing at an annual growth rate of 12% and 19% respectively.
Motor comprises of 2 sub-segments, Own Damage and Third Party Liability. Third Party liability insurance is what insurers pay third parties for damages caused by policy holder — this is mandatory as per law. Own damage insurance is what insurers pay policy holder for damages caused to their own properties. Roughly both segments contribute 50% to total Motor premium.
Health insurance refers to the general mediclaim policies, personal accident cover and overseas medical cover (travel insurance).
To summarize our observations so far:
- General insurance in India has a significantly lower penetration compared to other emerging markets
- Premium in general insurance is growing at a healthy double digit growth rate of 12%
- Health and motor are fastest growing segments within general insurance
- Almost all insurance companies have joint ventures with foreign partners
- Private players are much more dominant in general insurance than they are in health
