A new report, “India Insurance 2012: Fortune Favours the Bold”, by financial services practice of management consulting firm — McKinsey & Company discusses the future outlook of India’s life insurance industry.

It stated that total life insurance premiums market could grow from US$40 billion at present to US$80-100 billion by 2012, implying a higher annual growth of 19 per cent to 23 per cent in new business Annual Premium Equivalent (APE) during 2007-2012.

The report finds four factors will drive this growth in next five years. One, increasing per capita incomes will increase insurance intensity per capita, resulting in average household premiums rising from Rs 1,300 to Rs 3,000 — Rs 4,100. Two, emergence of newly bankable households and substantial increase in supply-side growth will raise penetration in both urban and rural areas.

Three, changes in the product mix as players make moves to lower the share of single premium products will lead to more regular premium collection.

Growing demand
And finally, the growing demand for long-term savings and investments products, which in India is a gap that life insurance products bridge.

Impressive growth in the sector over the past six years has been driven by liberalization, with new players significantly enhancing product awareness, promoting consumer education and information, and creating more organised distribution channels. But the study asserts that the sector is yet at a nascent stage. While players are at different stages of development and market presence, their strategies and business models are largely 'one-size-fits-all', with significant reliance of low margin single-premium policies and Unit-linked products as well as fairly undifferentiated distribution models.