India up 10 places in 10 yrs on insurance chart

UMBAI:MUMBAI: India has overtaken Spain to become the 11th largest insurance market in the World. But while the Indian market has jumped up 10 places in the last decade, Indian companies individually are yet to make their presence in global rankings because of their localized operations.

According to a report on world insurance markets in 2010, compiled by Swiss Re , total premium volume in the world market rose to $4339bn in 2010 - a growth of 2.7% after falling for two years after the global financial crisis. India's inflation adjusted growth which was only 4.91% in 2010-11 is still twice the growth recorded by global markets following a decline in US and several European markets.

In the decade since the opening up of the insurance sector the domestic protection industry has overtaken several developed markets. The gain in market share has accelerated after the crisis largely because of the shrinkage in several European markets. In the life insurance business alone India has raced ahead of ten major markets in the last decade. These include - Australia, Switzerland, Spain, Belgium, Sweden, Ireland, Netherlands, Canada, South Africa and Taiwan.

While the Indian market has grown, Indian companies are yet to make it to the top 20 list either in sales or market capitalisation.

According to Ashvin Parekh Partner Ernst & Young, Indian insurers have managed to grow by riding on the performance of the stock markets. "India per se is a strong savings economy and insurers have tried to capture this aspect by designing products around savings. And in order to render higher return they have designed products that are riding on the performance of other financial markets"

However, while the saving products give them the topline it does not necessarily translate into profits. "Although the margins are in the protection products, the real effort to push protection has not happened" said Mr Parekh. He points out that while the insurance companies have been successful in capturing the behavioural aspect of Indians when it came to finance they have willy-nilly shifted orientation to medium-term instead of having a long-term focus.

"From 2000 onwards, the Indian insurance markets has grown seven times. But at the same time the number of companies has grown four fold with around 45 insurance companies" said Monish Shah, director, Deloitte India. According to Mr Shah, the structural changes introduced by the regulator which will enable companies to raise capital from the markets and merge will be good for the industry. "In the medium-term there should be some consolidation and we will see some global size players from India" he said.

Most of the smaller markets like Canada, South Africa, Australia have companies that are giants compared to Indian companies. In terms of market capitalization, the top two life companies in the world are Chinese - China Life and Ping An Life Insurance. LIC which has marketshare of over 80% in total premium has revenues of less than $50bn, which keeps it out of the top 10 list.

Source:-Economics Times