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.
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:
|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%|
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.
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.
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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