Life insurance industry estimated to grow by 15% in next 5 yrs

The life insurance sector is estimated to grow by up to 15% compounded annual growth rate (CAGR) over the next five years, mainly due to multiple regulatory and industry changes brought in over the past few years and due to favourable demographics of the country, an industry body said today. "The worst is over for the life insurance industry that has not seen very positive growth figures in the past few years.

"With favourable demographics, new products launches on the anvil, industry expanding their operations and infusing efficiencies, the (insurance industry will see significant growth in India," Life Insurance Council Secretary General V Manickam told reporters here.

He further said that favourable demography, which is the insurable population, is expected to grow to 75 crore and life expectancy to 74 years by FY2020, which would help achieve spurt in the preference for Life Insurance. Thus, life insurance, which is the second most preferred financial instrument, would drive the growth in net household financial savings to an estimated 35% of total savings in next seven years, compared to meagre 26% in FY10.

"The life insurance industry is expected to record a CAGR of 12-15% over the next five years and the penetration measured as the percentage of insurance premium to gross domestic product (GDP) is likely to grow to 5% by year 2020 from current 3.2%," he said, adding that the current size is Rs 2.8-3 lakh crore.

When asked on extension of time for the filing of products under new product guideline, Manickam said: "We have given a representation to the regulator and are hopeful of a positive response."

Life Insurance Council also estimated a potential foreign exchange inflow of USD 10 billion in near term, when the FDI in the sector rises to 49%, as proposed by the Centre. The rise in the permissible limit would bring in stable capital inflows and help the industry mature faster.

Recently, IRDA has granted license to five Repositories that are authorised to open e-Insurance Accounts. "These accounts will help safeguard policyholders to hold insurance policy documents in electronic format and also provide access to the insurance portfolio online," Manickam added.

Life insurers are also planning to expand their distribution channel and increase the number of life insurance advisers to more than 30 lakhs over next five years and is expected to contribute Rs 3,50,000 crore towards the infrastructure projects by FY2020.

The Life insurance industry has witnessed growth in assets under management (AUMs), with investments that have been targeted towards deployment of funds enabling infrastructure growth in the country.