Good prospects for life insurance in India, says S&P
India’s life insurance sector is likely to grow by 20% year-on-year in the medium term and an increase in foreign direct investment to 49% will have a positive impact, global rating agency Standard & Poor’s (S&P) said.
By TNN |
NEW DELHI: India’s life insurance sector is likely to grow by 20% year-on-year in the medium term and an increase in foreign direct investment to 49% will have a positive impact, global rating agency Standard & Poor’s (S&P) said.
“Spurred by improving economic conditions, growing affluence, the need for health protection, and low penetration rates, the life insurance sector is expected to continue to grow at about 20% over the medium term,” S&P’s said in a report.
Driven by the growing middle class and rising disposable incomes, the growth prospects of Indian life insurance industry are good, it said.
“A positive development will be the anticipated lifting of the government’s ceiling on permitted foreign domestic investment in insurance companies to 49% from 26%,” the rating agency said. S&P said one of the growth drivers have been pension fund plans, which have found more acceptance due to extended life spans and improved medical facilities available in the country.
India’s largest life insurer LIC is still dominating the market, which was opened to private players in ’00 and about 14 private players have come up in 74:26 joint venture format between domestic and foreign companies.
Despite hardening interest rates, LIC recorded higher returns on account of the bullish performance of the Indian stock markets in the past few years.
However, S&P said: “LIC’s challenge has been to move away from guaranteeing long-term returns on life products and to improve its solvency ratio.”
Given LIC’s massive head start including in franchise and distribution, S&P said it will be some time before the new companies make a significant dent on the insurer’s market share.
However, the ability of new companies to introduce new and innovative products and services is expected to improve the private players’ market penetration, it said.
The increased market presence of private players is evident from their 26% market share in premiums underwritten in FY06. The life insurance penetration rate in India is also among the lowest in Asia, providing good growth opportunities, it added.
“Spurred by improving economic conditions, growing affluence, the need for health protection, and low penetration rates, the life insurance sector is expected to continue to grow at about 20% over the medium term,” S&P’s said in a report.
Driven by the growing middle class and rising disposable incomes, the growth prospects of Indian life insurance industry are good, it said.
“A positive development will be the anticipated lifting of the government’s ceiling on permitted foreign domestic investment in insurance companies to 49% from 26%,” the rating agency said. S&P said one of the growth drivers have been pension fund plans, which have found more acceptance due to extended life spans and improved medical facilities available in the country.
India’s largest life insurer LIC is still dominating the market, which was opened to private players in ’00 and about 14 private players have come up in 74:26 joint venture format between domestic and foreign companies.
Despite hardening interest rates, LIC recorded higher returns on account of the bullish performance of the Indian stock markets in the past few years.
However, S&P said: “LIC’s challenge has been to move away from guaranteeing long-term returns on life products and to improve its solvency ratio.”
Given LIC’s massive head start including in franchise and distribution, S&P said it will be some time before the new companies make a significant dent on the insurer’s market share.
However, the ability of new companies to introduce new and innovative products and services is expected to improve the private players’ market penetration, it said.
The increased market presence of private players is evident from their 26% market share in premiums underwritten in FY06. The life insurance penetration rate in India is also among the lowest in Asia, providing good growth opportunities, it added.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
