India Insurance Report Q2 2016
BMI View: Although already a large market in terms of overall premiums written, coverage remainslimited in India, and there is significant scope for the country's insurance market to grow rapidly from arelatively low base. The life sector is more mature than non-life, having established a role as a conduit forsavings and investments amongst wealthier households. As household income rates improve amongst lowerincome brackets, we would expect to see steady growth in demand for life cover leading to improved ratesof penetration and density. Similarly, improving household income in conjunction with wider economicgrowth will drive rapid expansion of the smaller non-life sector. Both life and non-life will benefit from animproving foreign investment environment, with the potential influx of capital and expertise providing anupside risk to our current forecasts.
Key Updates and Forecasts
The regulatory environment governing foreign investment in domestic insurance firms in India continuesto improve. In 2015 the government raised the limit on foreign ownership of a domestic insurer from29% to 49%. This has been followed by reports in February 2016 that the government is consideringallowing this investment to take place via the automatic route - at present the increased investmentrequires approval from the Foreign Investment Promotion Board (FIPB).
Reflecting the growing attractiveness of the Indian life insurance segment, US based private equity firmKKR announced in February 2016 it had acquired a 10% share in Max Financial Services for someUSD140mn. Meanwhile telecoms company Telenor (India) Communications announced it had nowprovided life insurance to 1mn of its customers via mobile prepays, reflecting the enormous growthpotential of an untapped market.
We are currently forecasting robust growth in India's life insurance sector, bolstered by rising householdincome rates and the use of more innovate distribution channels. We expect to see life premiums grow byan annual average of 5.4% (in local currency terms) over the forecast period between 2016 and 2020.
Faster growth is currently forecast for the smaller non-life sector, where access to first-time consumers isimproving rapidly. High demand for key health and motor lines underpin our forecasts for annual growthof 12.4% (in local currency terms) in total non-life insurance premiums between 2016 and 2020.
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