A recent report by FICCI and BCG has suggested that the Indian Insurance market will grow to USD 350-400 BN by 2020, and will be the among the top three insurance markets in the heart. This sensational headline has warmed the hearts of many, and made everyone excited about the potential of the industry. It is worthwhile to bear in mind that the current market size is around Rs 3 lakh crores, which is USD 70 bn. So we are talking about a 5 times increase in the next 10 years. We feel this is too aggressive and is more a headline grabbing, stand out from the clutter, screaming for attention news item.
We would actually pay far more attention to some of the other items that the report mentions:
1. Profitability is a huge issue for the Insurance industry in India, with the non life insurance industry having accumulated underwriting losses of Rs 30,000 crores and the life insurance industry have cumulative losses of Rs 16,000 crores
2. The agency model, the main distribution channel, is still proving to be unprofitable for the life and non life insurance sector
3.Insurance companies' obsession for topline growth has contributed to a inefficient, non sustainable operating model
4.Auto claims fraud, third party liability for motor and high level of claims for health insurance is crippling the general insurance industry in India
5. The recent tightening of charges for ULIPs has taken the wind out of the sails of the life insurance companies in India