Insurance industry is expected to reach US$ 350-400 billion in premium income by 2020, making India amongst top 3 life insurance markets and top 15 non-life insurance markets, says FICCI-BCG Report

According to Dr. Rajiv Kumar, Director General, FICCI, “The report estimates the total insurance premium at approximately INR 17 lakh crores to INR 22 lakh crores in 2020 (with life being INR 15 lakh crores to INR 20 lakh crores). This massive growth will have a significant impact on India’s ranking in the global insurance industry and is based on strong fundamentals.”

“While the industry has come a long way over the past decade, the big challenge with the industry is profitability. Private life insurers have accumulated losses of over INR 16,000 crores till March 2010. Similarly, the non–life industry has cumulative underwriting losses of nearly INR 30,000 crores”, said Alpesh Shah, Partner & Director, BCG India and author of the report.



There are multiple elements that contribute to this profitability challenge for insurers:

Agency is looking for the elusive profitable operating model, for both life and non–life insurers.

Economics of all other channels are also challenged, be it bancassurance, brokers, auto dealers, corporate agency or in–house salaried sales force.

Insurers’ fascination for top line growth at any cost has resulted in inefficient operating models and hence inferior opex ratios as compared to global benchmarks, in both life and non–life.

The claims cost in the case of non–life are very high arising from four key reasons — third party liability claims, health loss ratios (group health cross subsidy), fraud in the case of auto and health and lack of supplier (hospital/garage) management by insurers.

There is limited focus on the end customer and the intermediary is being given a more prominent position by insurers, with insufficient focus on maximizing value from existing customer.

Lastly, the recent regulatory changes on commission caps, caps on surrender changes and minimum guarantee return for pension products have turned the world upside down and tightened insurer margins.

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