The Indian insurance industry is currently the 16th largest market and expected to be one of the top 10 markets by 2025. The last few years have been challenging for the industry with declining growth in life insurance premiums and significant challenges in non-life profitability. This was driven by a combination of macro-economic factors and structural challenges inherent in the insurance industry. 

However, an improving economy with potential regulatory reforms and concerted action by the industry players can usher in an era of significant growth as well as value creation. 

CII report on “India Insurance Vision 2025: Building a USD 250 billion customer centric and value creating industry” defines the long-term vision and aspiration for the insurance industry. Done in partnership with McKinsey & Company it contains a fact-based view on the current state of the industry, its evolution over a period of time, key trends that will shape the industry in the next decade and therefore, the potential evolution. 

The report recommends an inclusive, progressive growth for the industry over the next decade. This will enable life insurance industry to grow at 12% CAGR over next decade to reach USD 160 bn – USD 175 bn and general insurance to grow at 22% CAGR to reach a GWP of USD 80 bn. 

“The insurance industry has the potential to grow three to five times in size over the next decade. For this to happen, policy action by the regulator, collaboration between players, individual player’s push to develop distribution and technical capabilities would be critical”, said Analjit Singh, Chairman, CII National Committee on Insurance and Pensions and Chairman, Max India Ltd. 

“Last few years have been challenging for the insurance industry with declining growth in life insurance and profitability challenges in non-life. However, an improving economy and a stable reformative government action plan can help drive significant growth and value-creation over the next few years”, said Sanjiv Bajaj, Co-Chair, CII National Committee on Insurance and Pensions and Managing Director, Bajaj Finserv Ltd. 

The CII recommendations for achieving the insurance industry vision 2025 include 

For the Life Insurance industry to achieve its Vision 2025 aspirations, the various stakeholders will need to take concerted action. The current industry “break points” need to be converted into a virtuous cycle of benefits for all stakeholders. 

·        Policy intervention by regulator: Incentivise long-term behavior; continue to push product reforms; deepen access and reach by promoting and enabling efficient business models; revisit distributor compensation norms; and strengthen supervisory approach to ensure a more healthy and stable industry structure.

·     Collected and coordinated action by industry: Raise the profile of Life Insurance for customers and distributors; invest in consumer awareness and education; define industry-wide performance standards for agency; and institutionalise skill building.

·       Individual player actions: Build customer centric business (moving away from distribution centric business that dominated till date)—product suite based on customer needs, fundamental shift in distribution model and focus on customer service and claims will become increasingly important

To help the general insurance industry unlock its full potential and realise its ambitious vision, the various industry stakeholders will need to take a set of coordinated actions.

·      The regulator and policy makers will need to foster deeper penetration and enable use of common infrastructure; the industry will collectively need to build consumer awareness, co-sponsor common infrastructure, encourage appropriate market conduct and collaborate with other associated industries to create new market opportunities.

·        Individual insurers will need to build distinctive granular customer insight, upgrade to next gen technical capabilities and build operating models to drive better efficiency

To ensure that the health industry achieves the holistic breakthrough situation, all stakeholders will need to make concerted efforts.

·        The regulator will need to accelerate distribution and product reforms; the government needs to expedite healthcare reforms across the complete value chain; providers will need to invest in public-private partnership to build rural and semi-urban reach.

·        The industry will need to build common infrastructure and individual players will need to continue investing in distribution and upgrading their technical capabilities.

CII is positive that all the industry stakeholders will work in a concerted manner to help achieve the vision of building a value creating and customer centric insurance industry over the next decade. 

New Delhi
February 26, 2015?