New players queuing up in general insurance space: Icra

Besides, the sector is likely to adopt measures like opting for franchise route and product differentiation to meet competition in the event of opening up of the sector to further foreign participation,"With the general insurance sector poised for significant growth, more players, including monolith players, are expected to enter the fray in the near future," Icra said in a report.

The low level of penetration of the insurance sector in the economy coupled with the long-term economic growth potential is likely to act as a major boost for the industry in increasing its business.
The report said after the global economic crisis, the premium in the insurance industry remained low while risk coverage increased, leading to a rise in claims for both public and private sector entities.
"Given the underwriting losses and the capacity expansion happening through the entry of new players, the industry may resort to consolidation via mergers and acquisitions to achieve economies of scale and reduce costs," it said.

Icra added that public sector players are well capitalised to support future growth arising out of unrealised capital gains from past investments while private players with relatively short operating history and low market share will need capital to fund future growth.

The general insurance sector is likely to continue facing pricing insufficiency and fight for market share in the near to medium term, thus continuing to face pressure on margins.

It, however, added that pursuit of profitable growth is expected to prompt the industry to follow risk-based pricing in the long term coupled with low penetration levels and favourable long term economic growth potential.

"Icra sees the current prevailing free pricing regime in the Indian general insurance industry provides the backdrop for risk-based pricing to emerge over the longer term," it said.