1273641,Shavika Gaba, F2, Q.32,The non life insurance industry has been growing in excess of 20% over the last two years however the penetration was as low as 0.7% of the GDP in FY10 comment?

INTRODUCTION-

In today’s age of consumerism, insurance requirements have expanded to keep pace with the increasing risks. Gone are the days when life insurances ruled the roost; today we have a wide assortment of risk coverage commencing from health insurance to travel insurance to theft insurance to even a wedding insurance. With affluence and spending capacity on the surge there is a growing trend to fulfil needs, deal with responsibilities and secure one’s possessions, be it good health or worldly wealth.
General insurance companies have willingly catered to these increasing demands and have offered a plethora of insurance covers that almost cover anything under the sun. 

DISCUSSION –

After liberalization of the Indian insurance industry in the year 1999- 2000, the Indian general insurance industry has witnessed rapid growth. As seen in Exhibit 3, the industry, in terms of gross direct premium, has grown from INR 11,446 crore in FY02 to INR 57,964 crore in FY12, which corresponds to a compounded annual growth rate (CAGR) of 17.6 percent. Insurance density – the ratio of premium underwritten in a given year to the total population, has increased from USD 2.4 in 2001 to USD 10 in 2011. The growth in the general insurance industry has kept pace with the nominal GDP growth rate resulting in general insurance penetration remaining stable in the range of 0.55% to 0.75% over the last 10 years.

The number of companies in the non-life insurance segment increased from 15 in FY04 to 27 in FY13; six of these companies are in the public sector. These six public sector companies together accounted for about 57 per cent of the total Gross Direct Premium in this segment. The public sector company, New India, leads with 14.5 per cent market share. However the private players are not far behind. The market share of private sector companies rose from 14.5 per cent in FY04 to 42.9 per cent in FY13 while the Gross Direct Premium of these companies increased from USD 0.5 billion in FY04 to USD 5.5 billion in FY13 at a CAGR of 33.1 per cent.

In the USD12.7 billion industry, motor insurance forms the largest non-life segment, with 43.1 per cent share in FY13, with Gross Direct Premium of USD 5,482.8 million while health insurance has been the fastest growing segment and formed 22.2% of the total market in FY13, with Gross Direct Premium of USD 2,824.7 million.

The non-life insurance industry has been growing in excess of 20% over the last two years however the penetration was as low as 0.7% of the GDP in FY10..

This is due to the following reasons:-

• Product pricing, innovation and simplicity
• Distribution
• Compensation
• Micro-insurance in non-life widening reach
• Governance and regulatory changes
• Health insurance
• Innovative products to counter the competition
• Improved fraud control mechanisms
• Standardization to reduce claims loss
• Reducing inefficiencies by revisiting third party administrator (TPA) agreements

CONCLUSION-

Despite there being over 30 players (in both general and life), the market is still under penetrated. In the general insurance sector, the penetration level is just about 0.65%. In India, the urban market is the major contributor for general insurance. Though the rural market does not have any significant contribution to this sector, it is growing rapidly over the past few years and is slowly becoming a huge potential market for general insurance in India. To capture the rural market, companies are adopting strategies to increase awareness levels among the people. This, they are achieving through increasing the distribution levels and access points. Business generation through multiple distribution channels is the main agenda for these companies. Some of them are even adopting the cutting-edge technologies like e-marketing and institutional marketing for deeper penetration in the rural market. - See more at:

The recent development in the general insurance sector is the activities by the insurance regulator. The IRDA has been very stringent and has been keeping a close-watch on the functioning of all the insurance companies. The latest regulation from IRDA is on health insurance portability. In the future, general insurance industry will be very much in the limelight than any other industry facing recession now.