INDIA’S SHARE OF LIFE INSURANCE GROWTH RISES

Mumbai: India’s share of the world life insurance business market grew marginally during 2007 to 1.97% from 1.68% a year ago. Life insurance premia generated from India amounted to equivalent of $47.1 billion in 2007, up from $37.22 billion in 2006.

Although new life insurance business in India slowed down considerably in 2007-08, the overall business grew by over 36% in dollar terms. This was partly because of the strengthening of the rupee vis-a-vis the US dollar. Also, the absolute growth includes renewal premium. According to a report by Swiss Re, the world life insurance market grew by 12.6% which translated to a real growth of 5.4% after adjusting for inflation. India’s real growth at 14.2% in 2007-08 is more than two-and-half times the world average.

Although, China has a slower growth rate, its market share has grown faster because of its high base. The country now accounts for 2.45% ($58.6 billion) of the world market in 2007, up from 2.04% ($45 billion) a year earlier. According to the latest Swiss Re sigma study, world insurance premium income (life and nonlife) grew 3.3% in real terms in 2007, reaching $4,061 billion. This growth was primarily driven by the life business in industrialised and emerging markets, and to a lesser extent, by the non-life business in emerging markets.

For Asia, insurance premium income reached $841 billion, representing an increase of 4.5% in real terms. India insurance premiums attained double-digit growth of 13% to $54 billion. Life insurance premiums increased 5.4%, which is above the previous 10-year average. Non-life premium growth was robust in the emerging markets (+10%), but decreased in the industrialised countries (0.3%). However, both life and nonlife industries are financially sound despite the challenging economic environment.

Daniel Staib, one of the study’s authors, says, “Despite a macroeconomic environment characterised by marginally slower economic growth and rising inflation, life insurance continued to expand in 2007 with world life insurance premiums increasing by 5.4% to $2,393 billion.” Sales of retirement and other wealth accumulation products spurred growth in the industrialised economies. Life insurance in emerging markets was fuelled by strong economic performance and catch-up potential.

The key driver of growth in life insurance business was the trend toward single premium business and pension and annuity products. According to the report, the insurance industry was shifting one from providing traditional life insurance to these new sectors because of ageing populations and reduction in state social security benefits. The report points out that although there was a severe credit crisis in 2007 which led to turbulence in the financial market insurance, sales were unaffected.

The non-life business continued to be profitable despite slow growth. Global non-life premium growth slowed to 0.7% in real terms, totalling $1,668 billion in 2007. Non-life premium growth continued to follow divergent trends in developed and emerging markets. While premium volume retreated in industrialised markets, growth slowed marginally in emerging markets.

Though downward pressure on premium rates continued in some countries, overall technical results were favourable and profitability remained sound. According to the latest Swiss Re sigma study, world insurance premium income (life and non-life) grew 3.3% in real terms in 2007, reaching $4,061 billion.

Source: The Economic Times