• Future Looks Promising For The Life Insurance Industry

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    Life Insurance
    • Premiums as low as Rs.17/day for sum assured of Rs.1 crore*
    • Claim up to Rs. 1,50,000 deduction under section 80C**
    • Choose between annual and monthly premium payment options

    The Indian life insurance industry has been witnessing significant growth ever since it was privatized in the year 2000. Life insurance plans went from the conventional protection plans to savings plans that offer regular returns with the help of the units they are linked to. Recent developments in the year 2016 such as the increase in Foreign Direct Investment (FDI) limits, rise in the bancassurance model, and digitalization of the insurance process have further pushed the overall performance of the life insurance sector.

    Individuals, today, look for plans that not only provide risk coverage but also high returns in the long run. Hence insurance companies offer a wide range of life insurance products that offer returns during the life insurance policy period. While endowment plans and Unit-Linked Insurance Plans (ULIPs) are two insurance types that provide regular returns, insurance companies also offer plans for a specific purpose, for example, child insurance plans, retirement plans, and so on.

    Apart from the many insurance products offered by both, public and private sector life insurers, the government has also introduced many schemes. The government-aided schemes are highly beneficial to those who belong to the lower economic class as the premiums required to be paid towards the policies are quite low.

    Performance of the Life Insurance Sector

    The life insurance industry in India has immense growth potential. This can be proved by the progress the industry has made especially in past year. Given below is the break up of the life insurance scenario in India based on the Insurance Regulatory Development Authority of India’s (IRDAI) annual report for the year 2016-17:

    • Premium: The premium collected by life insurers increased by 14.04% from the previous year. The private sector showed a 17.4% growth in terms of premium and LIC showed a growth equal to 12.78%. The renewal premium has a 58.13% share in the total premium received by life insurers and the first-year premium has the remaining 41.87% share.
    • New policies: While the number of new policies issued was higher in the year 2015-16, it is marginally lower in the year 2016-17. While LIC issued 76.1% of the total number of policies, private insurers issued 23.9% policies.
    • Market share: The market share, based on the total premium income, has risen significantly in the case of private life insurance companies and has dropped slightly in the case of LIC.
    • Benefits paid: There has been a 15.59% increase, from 2015-16 to 2016-17, in the value of benefits paid under the policies offered by the insurers. The benefits paid are 56.48% of the gross premium collected, which is a 0.76% increase from 2015-16.
    • Profits: The profits of the life insurance industry went up to Rs.7,727 crore in 2016-17, a 4.21% increase from the previous year. Out of the 24 life insurance companies, 18 companies reported profits including LIC.
    • Claim settlement ratio: The claim settlement ratio has remained almost the same with a marginal increase of 0.31%. While the ratio was 93.72% for private life insurance companies, it was 98.31% for LIC.
    Factor 2015-16 (Approximately) 2016-17 (Approximately) Rate of growth
    Premium Rs.3.6 lakh crore Rs.4.1 lakh crore 14.04%
    New policies 267.38 policies 264.56 policies -1.05%
    LIC’s market share 72.61% 71.81% -0.8%
    Private insurers’ market share 27.39% 28.19% 0.8%
    Benefits paid Rs.2.04 lakh crore Rs.2.36 lakh crore 7.41%
    Profits Rs.7,415.43 crore Rs.7,727.89 crore 4.21%
    Claim settlement ratio 97.43% 97.74% 0.31%
    • Insurance penetration: The life insurance penetration went up at the rate of 2.51% in the year 2001 and reached the peak in 2009 at 4.6%. After a slight decline for a few years, it reached 2.72% in 2015 and remained the same in 2016.

    Government Life Insurance Schemes

    The government of India has launched various life insurance schemes for the benefit of the people. These plans are especially advantageous to those who may not be able to afford a life insurance plan offered by other public or private insurance companies.

    • Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): This scheme is government-backed and offers a coverage of Rs.2 lakh. The premium payable towards the policy is Rs.330 per year and has the yearly renewability option. The coverage is given for a period of 1 year from June 1 of the current year to May 31 of the following year. If a person who is insured under this scheme passes away, the nominee will receive a benefit equal to Rs.2 lakh. Any individual between ages 18 years and 50 years with a bank account can avail the benefit under this scheme. The premium payable is auto-debited, as per the instruction provided, from his/her bank account within May 31 of the current year. Insurance companies such as LIC offer this policy.
    • Pradhan Mantri Suraksha Bima Yojana (PMSBY): This scheme has a sum insured amount of Rs.2 lakh and can be availed by anybody between ages 18 years and 70 years. The premium payable towards the policy is a nominal Rs.12 per year and is auto-debited from the policyholder’s bank account to which the scheme has been linked. The scheme provides the yearly renewability features and offers coverage from June 1 of the current year to May 31 of the following year. If a person who is covered under this plan passes away due to an accident, the nominee will receive a benefit equal to Rs.2 lakh. In case a person is partially disabled, he/she is provided with Rs.1 lakh and in case he/she is fully disabled, he/she will receive Rs.2 lakh. General insurance companies offer this insurance  scheme.
    • Pradhan Mantri Jan Dhan Yojana (PMJDY): This scheme was introduced with the objective to provide a bank account to individuals who do not have a bank account at all. The scheme would also help increase financial inclusion by providing financial services to people who do not have access to even basic financial services. Under this scheme, individuals will also receive an accidental death benefit cover equal to Rs.1 lakh. Further, those who subscribed to the bank account along with the RuPay Debit card offered were provided with a life cover equal to Rs.30,000. In case of death of the assured due to an accident, the nominee will receive Rs.1 lakh and in case his/her death was caused by any other reason, the nominee will receive Rs.30,000.

    Online Life Insurance Market in India

    Millions of people in India use the internet for various reasons including purchase of certain products through e-commerce websites. The improved infrastructure in the country has given the citizens access to mobile phones as well as the internet. Even people in remote areas can now purchase financial products at the click of a button. Since most people prefer carrying out transactions online than visiting branch offices, online purchase of life insurance has become the most popular medium for prospective insurance buyers. The online insurance market has already kick started and the online life insurance business is expected to grow by 3% - 5% by 2020. This will mean that the online sales of the life insurance business in India will be valued around Rs.3,500 to Rs.6,000 crore. Apart from purchase, individuals can even renew policies online. In the current scenario, 10%-15% of the renewals made are online renewals i.e. the industry is making Rs.15,000 crore to Rs.20,000 crore renewal premium through the online medium. By the year 2020, the online renewals will be 35%-50% of the individual renewal premiums, letting the industry make up to Rs.1.75 lakh crore to Rs.3 lakh crore.

    Conclusion

    The future of the life insurance sector in India looks promising and the innovations of the industry by the existing insurance companies coupled with modified insurance framework will lead to the overall success of the sector. By 2020, life insurance is expected to comprise 35% of all savings. With the increase in awareness about the importance of life insurance, the growing middle class, and current retirement planning trend, the life insurance penetration in India is sure to go up in the near future.

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