Indiaâ s General Insurance Penetration Level 0.

60% Of Its GDP: CRISIL-ASSOCHAM

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Indiaâ s General Insurance Penetration Level 0.60% Of Its GDP: CRISIL-ASSOCHAM
Tuesday, 21 July 2009 00:00 DARE News - Others
Despite the fact that general insurance business has been growing at a healthy
rate of 16% annually between 2004-05 to 2008-09, its penetration level is just
0.60% of Indiaâ s GDP against world average of 2.14%, says a Joint Research Paper
on Indian Insurance Industry brought out by CRISIL and ASSOCHAM.
â India ranks 136th on penetration levels and lags behind China (106), Thailand
(87), Russia (86), Brazil (85), Japan (61) and the US (9). The penetration of
general insurance in India remains low on account of low consumer preference,
largely untapped rural markets and constrained distribution channelsâ , adds the
Paper.
General insurance in India is a Rs 300 billion business in terms of annual
premium. General insurance business in India grew by a healthy 16% annually
during the past 5 years. The growth was led by motor insurance and health
insurance which grew by 16% and 37%, respectively, on an annual basis. Growth
has been driven both by the increase in the value of underlying assets with
rising GDP and personal incomes, as well as, by the increasing penetration
across categories.
Releasing the Paper, ASSOCHAM President, Sajjan Jindal said, â one of the biggest
constraints facing the general insurance business is the lack of reach beyond
the cities. While life insurance players are struggling with the quality of
insurance advisors, general insurance players face difficulty in getting
intermediaries to distribute their products. The average ticket size and the
commission rates are extremely low (compared to life insurance).
While the average ticket size of a life insurance product is around Rs 20,000,
the average ticket size for a general insurance policy is lower at around Rs
5,000. Further, with commission rates for general insurance being at around
10-15%, compared to life insurance which is around 35-40% (in the first year),
intermediaries do not prefer to distribute general insurance productsâ .
According to the Paper, over the past 5 years, the motor insurance segment has
grown around 16% annually during 2004-05 and 2008-09. This has been largely
driven by growth in vehicle sales (annual growth of 12 per cent) as well as by
the sharp increase in third party premium rates since 2007.
There are two types of auto policies - third party (TP) and own damage (OD).
Under the third party insurance policy, the insurance company agrees to cover
the insured person, if he is sued or held legally liable for injuries or damage
done to a third party. The â own-damageâ policy covers physical damage to the
vehicles in case of an accident. The product offerings can therefore be
categorised as either third party policies or comprehensive policies (which
include both TP and OD). The third party policy is mandated by law, whereas
comprehensive policy is optional.
In India most of the motor insurance policies belong to the third party
category. However customers are increasingly taking comprehensive policies, due
to growing awareness and increasing sales of relatively expensive vehicles. The
increasing sales of comprehensive policies have also contributed to the value
growth of motor insurance premiums apart from the increase in third party
premium rates and the growth in automobile sales.
Jindal pointed out that with India having a high number of road accidents
(annually around 0.13 million), its claims ratio has been a cause of concern.
The lack of road discipline and poor road conditions have been the main causes
for the high incidence of accidents. In 2007-08 the overall claims ratio for
motor vehicles was 92.3%, being especially high for the third-party segment.
(For private cars, the OD-incurred claims ratio was 65.4%, while the TP-incurred
claims ratio was 183.0% in 2005-06.) This is also the reason why the private
insurance companies prefer to provide comprehensive policies instead of
standalone third-party policies.
Health insurance is the second-largest contributor to the general insurance
space after motor insurance and has also been the fastest-growing segment.
Health insurance as indicated by its premium, is a Rs 61 billion business
annually and has grown at a 5-year CAGR of 37 per cent. Improving per capita
income, rising healthcare costs, and increasing group cover by the employers has
propelled its growth.
Source: ASSOCHAM
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written by Jatin Khan, September 14, 2009
"Hi,
It's good to se that general insurance sector has been growing at a healthy rate
of 16% annually between 2004-05 to 2008-09, I think that companies must take
steps to make it grow. I stumbled upon an online tool which might help Cos
increase thier online prescence
Please check this out at - http://www.simpleinsurance.co.in"
report abusevote downvote upVotes: +0

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