NEW DELHI: Even as the equity market is going through a correctional phase, India’s life insurance market continues to grow at a healthy pace. In the next three-to-five years, the industry is expected to maintain a healthy pace of growth at 12-15 per cent, according to V Viswanand, Senior Director and Chief Operations Officer, Max Life Insurance.
“Fast GDP growth rate, ‘financialisation’ of savings that was triggered by demonetisation and GST, movement of retail savings from physical assets like property/gold to financial assets, and a host of other factors have led to the life insurance sector seeing nearly 20 per cent growth for the last two years, after four-to-five years of single-digit growth,” Viswanand said.
According to him, the shift from physical assets to financial assets is likely to stay and the volatility in stock markets would propel people to turn towards life insurance. “Macro-economic conditions around the world are leading to volatility in the Indian stock markets, dollar-to-rupee rates, as well as rising interest rates. In such uncertain economic times, people are expected to turn to life insurance products to ensure an assured security,” he said.
Diwali bonus incomes and tax-saving purchases are expected to further boost insurance purchase in the next two quarters of the current fiscal, he said.
The private life insurance industry was pegged Rs 35,668 crore (Individual Adjusted Premium), and total industry (including LIC) at Rs 63, 470 crore for the 2017-18 financial year. In the Fiscal Year-To-Date (FYTD) (till August 2018), the size of the private industry stood at Rs 12,025 crore, recording a 9 per cent year-on-year (YoY) growth; the total industry stood at Rs 21,647 crore, recording an 8 per cent YoY growth.
Viswanand said that Max Life has been consistently outperforming the industry on growth rates and will continue to do so. In terms of individual First Year Premium, Max Life recorded a growth of 22 per cent against the overall industry growth of 9 per cent for the FYTD (August 2018).
The growth in the industry’s size has also improved the average ticket size of a policyholder. The average ticket size for FY18 for the private life insurance sector was around Rs 53,446, recording a 11 per cent YoY growth, while for the total industry (including LIC), the average ticket size was Rs 22,602, also recording a 11 per cent YoY growth. As of August 2018, the total number of policies stood at 2,82 crore.
However, the growth in life insurance industry has entirely come from the top 20 urban centres as 78 per cent concentration of the savings pool lies in urban India.
“Rural Indians still have the need for constant liquidity of savings and until we see a surge in small and medium enterprises in the rural and semi-urban sectors, we would see that urban centres would continue to dominate the life insurance market,” Viswanand said. Life insurance penetration has increased in rural markets, but the growth is not substantial yet.