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India Insurance Report Q1 2012
Business Monitor International, Jan 2012, Pages: 88
India Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on India's insurance industry.
Regulations (and tax) pose more of a constraint on the insurance sector of India than on its peers in other countries. In Q411, the life insurers, who have suffered from low profitability, are still adjusting to rules, introduced by the regulator in late 2010, which make it far harder to sell Unit-Linked Insurance Plans (ULIPs). There is a possibility that a slight relaxation of the rules, which is due to come into effect at the end of 2011, will make it significantly easier for the life insurers to develop ULIPs that are attractive to customers and profitable for them. In the meantime, many of the insurers are looking at ways of increasing capital. Some are partnering with banks. Others are taking steps to boost profitability prior to undertaking initial public offerings (IPOs).
Although the restrictions on sales of ULIPs have hit new business premiums hard, the resilience of renewal premiums – both for the life segment as a whole and for individual companies that have commented on their business in India through 2011 – means that the segment continues to grow at near double-digit rates. Many of the leading players are developing products that are not affected by the (changing) rules in relation to ULIPs. A wildcard – and a very positive one – is that the regulator may allow the private sector insurers to distribute their products through the (currently) tied agency network of Life Insurance Corporation of India (LIC), the titan that accounts for about three quarters of all premiums. Ironically, the ULIP saga may result in a life segment that is far more dynamic, more liberalised and better capitalised than it was in early 2010.
The latest newsflow from the non-life segment indicates that premiums continue to grow rapidly. Indeed, the trend of the last three years or so, in which non-life penetration has been falling (if gradually) appears to have come to an end. It seems that the non-life companies have been able to pass onto their customers the higher costs incurred in non-motor related lines (such as higher reinsurance premiums, for instance). Within motor-related lines, the wildcard is the possible abolition of the pool from which compulsory motorists’ third party liability (CMTPL) claims are paid. This could lead to an effective liberalisation of this important part of the non-life segment and an improvement in profitability. However, it is not clear what is the extent to which the non-life companies would be able to lift rates and premiums for motorrelated insurance.
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