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India long, China short in insurance

India spends 4% of its GDP on life insurance, China’s comparative figure is 1.8%, according to a report by Indian Insurance Review.

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India and China are the top players in emerging markets for insurance. A comparison in the business in the two countries shows that while India spends a greater proportion of its gross domestic product (GDP) on life insurance, China spends relatively more on general insurance.

India spends 4% of its GDP on life insurance, China’s comparative figure is 1.8%, according to a report by Indian Insurance Review. For general insurance or property and casualty (P&C), the comparative figures are 1.1% and 0.6%, respectively.

The Indian life insurance market is also more sophisticated in terms of product and distribution.

China’s industry growth is more focussed on “short-term single or renewable single premium policies sold as a substitute for bank deposits. India’s growth is more powered by long-term regular premium products sold for need,” the report said.

Indian insurance business is largely led by unit-linked policies although stock market volatility has had its impact on the premium growth of the industry.

“Private insurers have moved quickly from selling asset accumulation business to protection business. The outlook in our view is a continuation of strong growth.

However, with lower investment returns, continuing volatility in financial markets and near-term economic uncertainty, we think the emphasis will move from growth at any price, to growth with an increased emphasis on profitability,” the report observed.

Drawing comparisons on demographics between the two countries, Indian Insurance Review points out that India is more favourably placed than China.

The average age of the younger population, which is the principal driver of business, is lower at 26 years in India as against 35 in China. The age group is also growing faster at 2% per year in India than 1% per year in China. India has developed further in the service sector generating proportionately greater insurance demand.

On the other hand, property and casualty business has registered 13% growth in India against 19% in China. The report states that this lower growth is due to “irrational pricing” in India than China. “However, the market is more developed than China’s, with lower dependency on motor (41% of premiums vs China’s 70%).”

On foreign insurance companies, the key to the future, it says, is upping the FDI limit. “The government continues to evade its promise to allow foreign entities to raise their holding to 49% and to list private companies. This could be a constraint on contributing capital to develop industry further,” it stated.
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