Insurance sector gets a fresh lease of life

New premium income, life and non-life, up 33% in FY04

The life insurance industry has rebound, demonstrating a growth rate of 51 per cent in new business premium in the third year of privatisation.

Life insurance premiums rose to Rs 18,710 crore in fiscal 2004 from Rs 12,300 crore in 2002-03. The massive growth comes chiefly on the back of sale of unit-linked plans, group policies and pension plans.

The life insurance market showed a decline of 18.5 per cent in fiscal 2003 from Rs 15,100 crore in 2001-02 following a slowdown in sales of single premium policies. This was even as the private insurance players witnessed combined growth rates of over 330 per cent.

The Indian insurance sector has witnessed new premium income of Rs 34,828 crore in fiscal 2004. This reflects a growth rate of 33 per cent over fiscal 2003's aggregate figure of Rs 26,203.8 crore.

Against a growth rate of 51 per cent for life insurance business, non-life insurance premiums rose by 16 per cent to Rs 16,118 crore in fiscal 2004, said T K Banerjee, member, Insurance Regulatory and Development Authority (Irda).

He was speaking at the Banking, Insurance & Finance Total Solution seminar today in Mumbai. The non-life insurance sector accounted for a higher share of the aggregate new premium income with Rs 13,879 crore. However, in fiscal 2004, life insurance business accounted for over 53 per cent of the total new business.

A significant share of the new business has come on the back on sale of group policies. The Life Insurance Corporation of India (LIC) alone mopped up Rs 2,332.85 crore as it insured over 30 lakh lives under the various group schemes.

LIC's group business reached new heights during the year, recording a 119 per cent growth in new premium income and 50 per cent increase in the number of lives covered.

Many corporates are shifting their large superannuation and welfare schemes to insurance companies as interest rates have been falling, said S B Mathur, chairman, LIC.

Further, aside from the sale of products contributing to the growth in insurance premium, the use of alternate distribution channels, in particular, bancassurance, has also provided enormous opportunity for rapid growth of insurance in the country.

"European bancassurers have shown that by efficiently marketing insurance through the established bank distribution channels and simplifying products they were able to eliminate between 30 per cent and 50 per cent of distribution costs," Banerjee said.

He added that the new insurance companies are at present underwriting a sizeable portion of their business through the bancassurance route.

Private insurers have a limited network and currently are handicapped from selling across the country. However, aside from working on different modes of distribution, private players are also increasing their foot-print in the country.

To date, the total foreign direct investment in the Indian insurance sector is pegged at Rs 1,021 crore while the paid-up capital of the insurance sector stands at Rs 5,518 crore, said Banerjee.