Double-digit growth in life insurance sector to continue, new proposals to boost business: Milliman India

India’s life insurance sector is on track to achieve double-digit growth in the medium to long term and the regulator’s recent draft regulations would aid this acceleration, international actuarial and consulting firm Milliman India has said.

Growth momentum to continue

On November 24, the Insurance Regulatory and Development Authority of India (IRDAI) announced a slew of proposals to boost growth and increase insurance penetration.

The government has proposed amendments to the Insurance Act, 1938, with provisions for composite licences to insurance companies for selling life, general and health products. It has invited comments from all stakeholders by December 15.

“The growth trajectory will not slow down. We are positive on all these moves. The Indian market continues to be under-penetrated. The life insurance sector has been posting double-digit growth in new business premiums over the last few years and this is set continue with the IRDAI’s enabling regulations,” said Phillip Jackson, Principal and Consulting Actuary, Milliman India.

The life insurance industry posted a year-on-year growth of close to 38 percent in new business premium for the quarter ended September 2022. Individual, regular premiums grew 19 percent during the period.

The regulator also proposes to allow private equity firms to invest directly into insurance companies instead of taking the special purpose vehicle (SPV) route and permit corporate agents to tie up with up to nine insurers against three now.

It is also looking at easing capital raising norms and minimum capital requirements for setting up a new insurance company.

Also read: IRDAI eases investment and solvency norms, allows corporate agents up to 9 tie-ups

Commission and expense rules

IRDAI has proposed to roll back the earlier draft commission payout rules that mooted a specific cap of 20 percent of first-year premiums to be paid as commissions as long as the companies do not breach the overall expenses of management cap.

What this means is that commissions are unlikely to go down, for now, which many independent experts see as a dampener for policyholders.

“However, the fact that the Indian insurance sector has expenses of management caps puts it in a unique position in Asia. It is already a positive,” Jackson said.

The insurance industry has matured over the years and after putting in place regulations around products, commissions and policyholder protection, the regulator is now also focussed on industry growth, which is part of its mandate.

“The IRDAI is putting in place enabling provisions and setting targets for the life insurance sector to grow. The thought process behind all the regulatory changes is to increase penetration and drive growth,” said Jackson.

Also read: Rise in term insurance premiums: Here’s what you should do

Impact of Covid

Term insurance rates in India have risen sharply – up to 45 percent last year – during the course of the coronavirus pandemic. Insurers hiked these rates on the back of global reinsurance companies raising their rates since 2020.

“The impact of the pandemic is bound to be felt more acutely by reinsurance companies than direct insurers,” Jackson said.

COVID-19, however, is less of a factor in underwriting strategies now than it was last year. “Clear data and trends on the impact of long Covid is yet to emerge,” he added.