The Hindu Business Line : ‘Insurance sector to cross Rs 2 lakh-cr mark by 2010’

New Delhi, Dec. 24 The entry of new players and increase in the penetration levels, could see the insurance sector cross the Rs 2,00,000-crore mark in business by 2010, a study done by industry body Assocham has said.

The current size of the sector is estimated to be at Rs 50,000 crore, which has seen a compound annual growth rate (CAGR) of around 175 per cent in the last few years, the study called Insurance in Next Two Years, has noted.

“The insurance sector, both life and non-life, is likely to grow by over 200 per cent, and private insurers are expected to achieve a growth rate of 140 per cent as a result of aggressive marketing technique,” the study said.

It added that the growth of state-owned insurance companies is likely to be around 35-40 per cent.

“On account of intense marketing strategies adopted by the private insurance players, the market share of state-owned insurance companies like GIC, LIC and others has come down to 70 per cent in last 4-5 years from over 97 per cent,” Mr Venugopal Dhoot, President of Assocham, said in a statement.

The study also noted that private insurance companies would further adopt aggressive marketing techniques. “Despite regulation, the private players are offering 35 per cent rate of return to its policy holders against 20 per cent by public-sector insurers. This factor is mainly responsible for a hike in private insurance market share that will grow further,” it said.

It added that public sector companies offer a limited number of policies compared to private firms, besides premium amount and maturity period are also more competitive.

“The private players have started exploring the rural markets in which until recently, the state-owned companies had the monopoly,” Mr Dhoot said.

The industry body also noted that India’s life insurance premium is 1.8 per cent as a percentage of GDP whereas it is 5.2 per cent in the US, 6.5 per cent in the UK and 8 per cent in South Korea.

The chamber suggested the insurers’ strategy should stimulate demand in areas that are currently not served at all.

“The services sector offers immense opportunities for expansion opportunities and the rural market, also, offers tremendous growth opportunities for insurance companies. Insurers should develop viable and cost-effective distribution channels, build consumer awareness and confidence,” the study said.