INTRODUCTION
After more than a decade, the life insurance industry has
shown comparatively better penetration and growth in India, which is evident
from the increased numbers of private (foreign and domestic) players, increased
reach and awareness of the end customers, growth in insurance premiums,
innovation in product offerings, and enhanced role of regulatory framework.
DISCUSSION
For the life insurance industry, the period after
liberalization can be termed as the phase I, which witnessed an introduction of
insurance products and rapid growth of 24.2% of CAGR in annualized premium equivalent.
During this first phase of development, insurance industry had been dependent
on regular capital investments from its promoters, focused entirely on
profitability, and basic automation was done. In the next four to five years, i.e.,
phase II, witnessed players focusing on expansion of product range, introduction
of innovative products, and development of a strong distribution channel. So,
during this second phase, the industry grew at a CAGR of 25.9% with focus of
the insurers shifted to profitable growth, which led to more rational product
pricing based on more conservative assumptions and the use of better technology
(CRM and ERP) ensured efficiency.
The Indian insurance market is poised for strong growth in
the long run. It stands at the threshold of moving towards a stable position,
delivering “stable profitable growth.”
Significant latent market - The insurance market has a
considerable amount of latent potential, given the fact that the Indian economy
is expected to do well in the coming decades leading to increase in per capita
incomes and awareness.
Channelizing industry focus - In meeting the significant
potential, the industry has an increased role and responsibility. Three areas
of focus could be — a) product innovation matching the risk profile of the
policy holders b) re engineering the distribution and more significantly c)
making sales and marketing more responsible and answerable.
Distribution - Distribution channels evolved in response to
market dynamics and changing consumer preferences. The alignment of economic
incentives with distribution dynamics should be driven by market forces rather
than regulatory intervention.
Regulation - The industry should be given time to adjust to
regulatory changes in a phased manner aligned with a regulatory impact
assessment. Regulations need to drive transparency and simplification of
products and services.
CONCLUSION
The market today is
primarily dependent on push, tax incentives and mandatory buying for sales.
There is very little customer pull, which will come from growing financial
awareness and increasing savings and disposable income.
In the long run the insurance industry is still poised for a
strong growth as the domestic economy is expected to grow steadily. This will
lead to rise in per ca pita and disposable income, while savings are expected to
be stable. The stakeholders should eventually work toward maintaining a favorable
environment for stable growth, increasing the penetration of insurance to rural
and under penetrated areas and increasing the contribution to the economy.
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