The lack of new companies in the country’s insurance industry is going to end soon. Insurance regulator IRDA has received applications from 20 companies for approval. About a dozen of these insurance companies are expected to start business this year. The target of this exercise of IRDA is to provide life, health and property insurance cover to every citizen of the country by the year 2047. The insurance penetration in the country is very limited.
According to the Economic Survey 2022-23, in the year 2020-21, the penetration of life insurance companies in the country was 3.2 percent. Penetration means the contribution of insurance premium to the country’s GDP. However, in the year 2021-22, there has been an increase of 10.2 percent in life insurance premium on an annual basis. The contribution of income from new business to the total premium collection has been 45.5%. According to the survey, India will be among the fastest growing insurance markets in the coming decade. In order to increase the reach of insurance in the country, IRDA has been taking quick decisions for the last few months.
What is the plan?
IRDA plans to issue licences to about a dozen insurance companies this year. Earlier, after a long gap of almost a decade, insurance licences were given to three companies last year. Companies that have received new licenses include Kshama General Insurance, Credit Access Life and Acko Life. With the joining of new companies, there are now 25 companies in the life insurance business and 34 in the general insurance sector in the country. After the new companies get licence this year, the number of insurance companies will increase by about 20 percent and reach beyond 70.
What is the status?
Right now the main business of insurance in the country is limited to the cities. There is a wide scope for its expansion in rural areas. In fact, the products that insurance companies are currently selling have been prepared according to the people of urban areas. The existing products of insurance are not able to attract the common people. The main reason for this is that these products are out of reach of common people. Obviously, to achieve the goal of ‘insurance for all’ by the year 2047, there is a need to increase the scope of the insurance industry in the country. At present the Indian insurance industry is the 10th largest market in the world. At present, there is Foreign Direct Investment (FDI) of about Rs 57,000 crore in the insurance sector. IRDA expects the domestic insurance market to reach $200 billion by 2027.
What would be the benefit?
Personal finance expert Rahul Sharma says that due to the entry of a large number of new companies in the insurance sector, an environment of competition will be created in the market. This will create competition among companies to launch new and attractive products for insurance customers. Along with this, companies can also reduce the premium rates of insurance. This will attract more and more people towards taking insurance. Awareness among people will increase regarding which insurance is important and why. The dominance of the already existing giants in the market will end. Sharma says that another major advantage of expanding the scope of the insurance industry would be that companies would open their offices across the country and increase their distribution network. This will provide a large number of employment opportunities.
