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The Indian insurance sector is projected to grow at less than five per cent this financial year, according to a survey by the Confederation of Indian Industry (CII).
Non-life insurers were more optimistic about growth, compared with life insurers, said the survey.
Nearly 60 per cent of non-life insurance companies projected an average growth of more than 10 per cent, whereas 50 per cent of surveyed life insurers expected to see negative growth in the current financial year. "While the Indian insurance industry is acknowledged globally to have matured tremendously since the opening of the sector in 2001, a facilitative and enabling regulatory and policy environment is critical to ensure insurance companies in India enter the next stage of growth and evolution on the foundation of greater insurance density and penetration," said Chandrajit Banerjee, director-general, CII.
The life insurance segment has seen contraction in new premium collection for 2012-13, while the non-life sector has seen a higher growth in total premiums in the year, compared with FY12. The survey assessed the outlook of the insurance sector in India while focusing on the impact of regulatory and policy environment in increasing insurance density and penetration and on the business outlook of insurance companies. (STUNTED GROWTH FOR INSURANCE SECTOR)
Among the key factors envisaged to help strengthen insurance density and penetration, the sector has ranked open architecture of distribution channels as the most important measure, followed by a removal of caps on the acquisition cost of business and enhancing customer education and financial literacy.
Final bancassurance guidelines are still awaited from the Insurance Regulatory and Development Authority.
Increasing the foreign direct investment cap from 26 per cent to 49 per cent, said the survey, is viewed as the next major factor that would push the insurance density and penetration. On the direct taxes code proposals, 60 per cent of the surveyed companies said the proposed provisions would have a negative impact on the insurance sector.
The DTC proposals include an increase in cover multiple from 10 times to 20 times, reduction in exemption limit for life insurance premiums from Rs 1 lakh to Rs 50,000, levy of five per cent distribution tax and an increase in corporate tax rate from the current 12.5 per cent to 30 per cent.
On Irda's draft micro-insurance guidelines, insurance companies seemed to be equally divided in gauging the effectiveness of the norms in achieving the larger financial inclusion agenda. Irda had issued draft guidelines to facilitate the penetration of insurance among the people in the 'bottom of the pyramid' population through products which will cover aspects of life and non-life insurance.
This survey was based on responses from 30 insurance companies from life insurance and general insurance sector.
