Indian non-life insurance sector is a goldmine: S&P
The Indian non-life insurance sector has substantial growth potential because market penetration remained low--leaving significant room for further growth, said an article published by Standard & Poor's Ratings Services.
The Indian non-life insurance sector has substantial growth potential because market penetration remained low--leaving significant room for further growth, said an article published by Standard & Poor's Ratings Services, titled "The Indian Non-Life Insurance Sector Is A Goldmine Of Growth Potential."
India's insurance industry has emerged as one of the fastest developing markets of the global insurance industry. "However, its non-life sector, which includes property/casualty and health insurance, has one of the lowest penetration rates in Asia," said Standard & Poor's credit analyst Damien Magarelli. India has the second-largest population in the world.From 1994 through 2008, Indian regulators phased out price controls for the major insurance segments, shifting the industry's dynamics and creating both opportunities and challenges for the non-life insurers. Private insurers took advantage of the opportunities and consistently improved their market share and emerged as serious competitors to the public insurers. And, during the past 10 years, the non-life sector maintained--on absolute levels--an impressive growth momentum.But despite these improvements, the non-life sector continues to face significant challenges relating to underwriting discipline, growth policies, and risk management. In addition, the sector continues to operate an unsustainable business model of relying on investment income which is vulnerable to market volatility to offset underwriting losses. "We view the insurers' persistently poor underwriting performance as a negative factor that could potentially stunt the industry's growth if it remains unchanged," said Magarelli."The sector can overcome some of these hurdles in the years to come," said Magarelli. "Provided that the insurers focus more on key factors to determine performance and sustainability of profitability," he continued. These factors include efficient claims management, cost control, superior customer service, product innovation, and timely regulatory reforms.Further, Standard & Poor's expects that some upcoming developments will change the Indian insurance industry's dynamics within the next five years. These include the potential increase in foreign direct investment, which would provide long-awaited infusion of capital, and favorable policy changes such as initiatives for public awareness and increasing transparency, and infrastructure and operations development. "We believe that these factors would facilitate further growth of the non-life insurance sector," said Magarelli.In addition to the regulatory actions and progressive policies, Standard & Poor's believes that favorably macroeconomic factors will also facilitate the sector's growth in the long run. The population demographics in India create a favorable environment for the insurance industry's growth. This and other factors such as raising income levels, increased demand for vehicles, increasing health awareness, a shift towards an industrial and service-oriented economy, and a demand for more customized and sophisticated risk solutions enhance the non-life sector's long-term growth prospects with increase in penetration levels.Disclaimer: The following statement was released by the rating agency Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
