The history of India’s insurance industry dates back to the pre-independence era, with the establishment of Oriental Life Insurance Company in the early 19th century. Insurance companies were nationalized after independence and the industry was opened up to private players only after the post-liberalization measures in 1991. Today, the value of gross premiums collected by life insurance companies is almost over seven trillion Indian rupees with insurance penetration levels as well as the density showing an upward trend. However, India has a far lower insurance penetration rate compared to the global average, leaving much room for growth.
Segments of the insurance industry
The industry is divided into two categories- life insurance and non-life insurance, also known as general insurance. Both these are governed by the Insurance Regulatory and Development Authority of India (IRDAI) whose main role is to monitor the sector while safeguarding the rights of consumers. Overall, the country has 69 registered insurers, of which 24 are part of the life insurance sector, 26 are general non-life insurers, and the remaining make up the standalone health insurers and re-insurance agents. In the life insurance sector, the Life Insurance Corporation (LIC) is the only public sector company, while the non-life insurance sector has six public sector insurers. Notably, LIC has been one of the leading brands in the country in terms of its brand value and was worth over 9.8 billion U.S. dollars in 2023.
Private insurers have been recording good growth in the non-life insurance sector. In fact, since the financial year 2019, private non-life insurers are leading ahead of public insurers in terms of market share. Traditionally, the non-life market in the country has been dominated by motor vehicle insurance due to mandatory third-party liability. However, in the recent years health insurance sector has grown and even surpassed market share of motor insurance due to growing awareness regarding healthcare along with high out-of-pocket healthcare expenses.
Transforming insurance landscape
The government of India has also invested in several initiatives to boost the insurance industry. In September 2018, the National Health Protection Scheme was launched under Ayushman Bharat Yojana to provide coverage of up to 500 thousand Indian rupees to vulnerable families below the poverty line. In the fiscal year 2018, around 359 million people were covered under government-sponsored health insurance schemes, and this was expected to reach over 526 million people by the financial year 2030.
Apart from these schemes, the government announced the proposal to liberalize foreign direct investments in the insurance sector from 49% in 2021 to 74% in 2022 opening up robust opportunities for the sector in the coming years. Additionally, India’s insurance sector is witnessing a surge of insurtech startups and businesses across the value chain. In the future, India’s insurance companies would need to leverage technology within the organization and for customer interaction to untap the full potential of the market and insurtechs are expected to play a key role in the transformation of the insurance sector.
