Consistent growth, burgeoning life insurers, the dominance of private players and the increasing popularity of Unit linked insurance policies (Ulips) will shape up the life insurance industry in the next couple of years, according to a report released by Macquarie Research, India Insurance Eye. The report has projected a 44 per cent compounded annual growth rate (CAGR) from the years 2003 to 2011 for new businesses, with the life insurance premium constituting about 6.2 per cent of the GDP. Changing demographics is pointed out as the key driver since Insurance is largely linked to the age of the population and is sold to young people as part of their financial planning activities. This age-group for life insurance (20-40) is expected to grow by 1.35 per cent compounded annually over the next five years, against a CAGR of 1.75 per cent over the last five years.

The report also points to the fast increasing dominance of private players due to deepening penetration, better advisors and a huge basket of innovative product. Pointing out the weaknesses of state-owned Life Insurance Corporation (LIC), the report says that such a branding would be exploited by private insurers on the grounds of fund management skills and customer service. Also, since LIC has limited itself to a tax saving device, private insurers will get a larger audience by pitching their products as investment and risk cover tools.

This, the report has predicted, we will see a lot of new entrants in the next one or two years. However, companies promoted by PSU bank consortia have not emerged as potential insurers since most PSU banks are just at the edge of capital adequacy norms. The capacity to fund a start-up insurance company is limited the report adds. However, the report picks up two new entrants, Reliance and Bharti AXA, as promising insurers with the market share rising to 8 per cent by 2010 (from the current 4.5 per cent).

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