ICRA Predicts Life Insurance Sector To Grow By 12-15% in FY-16

Karthik Srinivasan, Senior Vice-President and Co-Head of ICRA said, “The sector will grow on an annual premium equivalent (APE) as compared to 9% decline in FY15 due to improved economic indicators that include bullish capital market, and stronger drive by the government to boost the insurance sector. We trust that the key structural drivers for the industry will remain intact and the improving economy will provide momentum to the industry.” 

He further predicts a growth of 15% is expected in the insurance industry in the next decade, with improving operating scenario.     

ICRA bases its reports on performance analysis of nine life insurance companies — eight private sector companies and the other being government-owned LIC — which collectively represent 92% of the insurance market.

Despite the recorded 12% increase in the levels of new business premium (NBP) in AY 13-14, the industry declined by 5% in AY 14-15 to Rs 1,131 BB. The decline was due to the reduction in both regular and single premium divisions.

However, in 2014-15, NBP rose by 18% for private players of the insurance sector, while due to a decline in its individual business, LIC profits were tapered by 13%. Furthermore, agents drive business and growth in LIC, on the other hand, the bancassurance is rapidly gaining popularity among private sector players, as a key distribution and sales channel. 

ICRA believes that raising of FDI ceiling to 49% from the previous threshold of 26% will boost capital inflow, an estimated USD 6-8bn for private sector life insurance companies.

However, since the private life insurers have adequate capital, they do not require a heavy investment from foreign investors. Moreover, the cash inflow from FDI and its allocation to parent and off-shoot insurance companies is not clear.    

In the general insurance segment, the solvency ratio for the public insurers remains stronger as compared to the private players. The capital requirement for general insurance sector will oscillate between USD 60bn and USD 195bn in the next 5 years, predicts ICRA.   

Source: This news was published on July 06, 2015 in economictimes.indiatimes.com under the title: “Life insurance sector likely to grow 12-15% in FY16: ICRA”