An ICRA research says that private insurers will increase their footprint and give stiff competition to their public counterparts.
Credit rating agency ICRA has estimated that life insurance and general insurance sector will grow at 10% and 14% respectively in FY 2014-15. The study predicts that private insurers will increase their footprint and give a run for money to their public counterparts in both the sectors.
Life Insurance
The study has predicted that the growth of life insurers will range between 12% and 15% on annual premium equivalent (APE) basis over the next few years. The study says that the key structural drivers like underpenetrated market, favourable demographics and high savings rate coupled with better products can provide impetus to the life insurance industry.
The rating agency expects that the private insurers will do well and give stiff competition to their public sector counterparts through technology and service. It says, “Having lost market share to LIC over the last few years, we expect the private players to offer stiff competition to LIC going forward as they build their product offering and leverage technology to expand their reach and service capabilities.”
On the distribution front, the study says that the insurers having banks as promoter would decrease their dependency on their banking channel for distribution. The industry would leverage technology and increase focus on franchise building for distribution.
Meanwhile, the shift from ULIPs to a more balanced portfolio mix augurs well for the industry especially for the private sector players, adds the report.
Non-life Insurance
The study estimates that the general insurance sector will grow at 12-14% in FY 2014-15. It says that the industry has controlled its management expenses in the past few years. Also, the reduced claim ratio and steady net commissions have helped the industry to improve its underwriting performance, adds ICRA.
ICRA suggests that the industry requires a capital of around Rs. 50,000 crore to Rs.70,000 crore to increase its penetration to reach the global average over the next five years i.e. from 0.8% to 2.8%.
On FDI, the report says that the participation of foreign players can improve claim settlement ratio, operating efficiency and client servicing.