The total premium could go up to $80-100 billion by 2012 from the present $40 billion as higher per capita income increases per capita insurance intensity, the report released on Monday said. The average household premium will rise to Rs 3,000-4,100 from the current Rs 1,300 as will penetration by the existing and new players, McKinsey said.
India's ratio of life insurance premium to its GDP is around 4 per cent against 6-9 per cent in the developed world. But, the report said, it could rise to 5.1-6.2 by 2012 in tandem with the country's demographic profile. That Indians rank life insurance higher than other investment options for tax benefits and protection will also help, it noted.
India has 17 life insurers and the state-owned Life Insurance Corp of India dominates the industry with over 70 percent market share, though private players have been growing aggressively.
Foreign holding in Indian insurance companies is limited to 26 per cent. The government wants to increase the cap to 49 percent, but such a move is opposed by its communist allies. The report said the market should move beyond single-premium policies and unit linked insurance products which are easier to sell.
The agency model is the dominant sales channel accounting for more than 85 per cent of fresh premiums but overall inactivity and attrition is much higher at 50-55 per cent than the global average of 25 per cent, McKinsey said.
Opportunities include health insurance and pensions, the report said, adding only 1.5-2 per cent of total healthcare expenditure in India was currently covered by insurance.
If we look at the report with open eyes we could see that there would be lots of money which will flow from insurance sector to stock market too. Unit linked and pension plan money will be put into long term growth companies so that the investments will be stable.
The information courtesy The Economic Times.
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