Higher Life Expectancy Drives Growth of India Life Insurance Segment, Says Timetric

22 Feb 2013 • by Natalie Aster

The Indian life insurance segment recorded significant growth at a CAGR of 16.9% during the review period. The increase was primarily due to the rapid expansion of the individual unit-linked policies which increased from 28.7 million in 2007 to 72 million in 2011, after increasing at a CAGR of 25.9% in the same time period. This was further encouraged by the expanding population, robust economic growth, lucrative tax benefits, rising disposable income levels and increased awareness of the need for insurance, especially among the younger population. These factors are expected to support the segment over the forecast period as it is projected to grow at a CAGR of 14.6%.

According to the report “Life Insurance in India, Key Trends and Opportunities to 2016” by Timetric, ULIPs product category is expected to remain buoyant and record a CAGR of 5.8% in terms of gross written premium over the forecast period. This growth is expected despite the Insurance Regulatory and Development Authority’s (IRDA) recent changes to the structure and framework for unit-linked insurance plans to protect the interests of policyholders, such as the increase in lock-in period for unit-linked insurance products from three years to five years. Unit-linked pension and annuity products will offer a minimum guaranteed return of 4.5% per annum on maturity and surrender charges have been decreased for the first few years.

Report Details:

Life Insurance in India, Key Trends and Opportunities to 2016
Published: October, 2012
Pages: 239
Price: US$ 1,950.00

Investing in life insurance products entitles individuals to tax exemptions under various sections of the Indian Government’s Income Tax Act. Life insurance policies are governed by an EEE regime, under which the premiums paid, income earned from investments and payment of maturity proceeds are all exempt from tax. Under Section 80C of the Indian Income Tax Act, investments made in instruments such as life insurance premiums and pension superannuation funds, are subject to a rebate up to a limit of INR100,000. These tax incentives lead to higher investments in life insurance and pension products.

The IRDA proposed an increase in the FDI limit, from 26% to 49% in the insurance industry. The increased FDI cap is anticipated to attract global insurers to invest in the segment, which is expected to intensify the competition among domestic firms over the forecast period.

Higher life expectancy was a key driver of growth in the Indian life insurance segment during the review period. Life expectancy is used to calculate the premium paid by policy holders while purchasing a life insurance policy. Life expectancy in India increased as people aged above 64 rose from 55.3 million in 2007 to 62.2 million in 2012. Life expectancy is projected to increase further as the number of people aged above 64 is expected to reach 77.1 million by the end of the forecast period. This is likely to contribute towards the growth of life insurance segment.

More information can be found in the report “Life Insurance in India, Key Trends and Opportunities to 2016” by Timetric.

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