India's insurance sector, which is witnessing a rapid growth, is likely to touch about $400 billion in premium income by 2020, making the country one of the top three life insurance and top 15 non-life insurance markets by 2020, according to a report.
"The insurance industry will continue to outpace the rapid economic growth to reach $350-400 billion in premium income by 2020 (approximately Rs 17-22 lakh crore), making India among the top three life insurance markets and top 15 non-life insurance markets by 2020," a report by Federation of Indian Chamber of Commerce and Industry (FICCI) and the Boston Consulting Group (BCG) has said.
The total penetration of insurance (premium as percentage of GDP) has increased to 5.2% in 2011 from 2.3% in 2001, said the report titled 'India Insurance - Turning 10, Going on 20'.
In addition, there has been a surge in insurance coverage due to availability of more products like better term plan, Ulips, whole life, maximum NAV guarantee, auto assistance, disease management and wellness, it said.
The number of life policies had increased nearly 12 fold over the past decade and health insurance nearly 25 fold.
Progress has been made with emergence of multiple channels like bancassurance, broking, corporate agency, direct and auto dealers to complement the existing third party agency and in�house salaried sales force, ICICI Prudential Life Insurance Managing Director and CEO Sandeep Bakhshi said.
Along with the emergence of multiple channels, the distribution reach has also gone up, nearly 6 fold for life, and 1.5 times for non�life, evolving the Indian market from a monopoly to a competitive one, he said.
This massive growth will have a major impact on India's ranking in the global insurance industry and is based on strong fundamentals, FICCI Director General Rajiv Kumar said, quoting the report.
"While the industry has come a long way over the past decade, the big challenge with the industry is profitability. Private life insurers have accumulated losses of over Rs 16,000 crore till March, 2010. Similarly, the non�life industry has cumulative underwriting losses of nearly Rs 30,000 crore," BCG India Partner and Director Alpesh Shah said.
The report suggested that for sustainable profitability, the companies need to fix the agency operating model, build strategic, long-term non-agency partnership, incubate, experiment and develop alternative channels, develop a customer-centric operating model, target customer or product white spaces and go lean.
For non-life insurers, it defined a six-point agenda like creating optimal product portfolio, innovate to target product or customer white spaces, move towards risk based pricing, develop next generation claims management processes, go direct � build alternate channels for retail products and define and enhance agency sales force operating model.