Asian Journal of Management and Commerce 2023; 4(1): 156-160

E-ISSN: 2708-4523
P-ISSN: 2708-4515
AJMC 2023; 4(1): 156-160 Indian life insurance industry – Future looks good
© 2023 AJMC
www.allcommercejournal.com
Received: 20-03-2023 Dr. CH Vishnu Murthy and Dr. G Raju Kumar
Accepted: 27-04-2023

Dr. CH Vishnu Murthy Abstract

HOD and Assistant Professor, The insurance industry has undergone a massive change over the last few years and the metamorphosis
Department of Commerce, Dr. has been noteworthy. There are numerous private and government insurance companies in India that
V.S. Krishna Govt. Degree & have become synonymous with the term insurance over the years. Offering a diversified product
PG College (A) portfolio and excellent services the many insurance companies in India have managed to make their
Visakhapatnam, Andhra way into almost every Indian household. Indian Life insurance sector is growing at a faster rate. This
Pradesh, India sun rising industry has given a platform for economic growth and employment. The great extent of
importance realized after it has opened to the private players in the post liberalization period. With
Dr. G Raju Kumar many players in business, the insurance regulatory and development authority came with innovative
Lecturer, Department of
and constructive guidelines for both products and services. This paper discusses the new trends and
Commerce Dr. V.S. Krishna
Govt. Degree & PG College (A)
challenges that the present industry is facing. Our study is only limited to life insurance sector and
Visakhapatnam, Andhra small emphasis on other sectors. The suggestion and recommendation will help both academician and
Pradesh, India industry personnel to re- engineer their thought in insurance sector.

Keywords: Insurance industry, India, growth, life insurance, ULIP, IRDA

Introduction
India’s insurance market has undergone numerous changes and is one of the fastest-growing
markets today. The pandemic has sped up the industry’s rapid digitalization, reflected a rise
in its demand, necessitated the development of new products, and more. Furthermore, the
prospects show there have been disruptions owing to the extraneous factors that have led to
the evolution of the industry itself. According to IRDAI, the sector has witnessed growth
between 12 and 15 percent over a five- to six-year horizon. Insurance is one of the
demanding financial products in India. Its basic motto is to protect the family of any
uncertainty in life. So it is long term investment and need knowledge about that. Indian life
insurance is too old. It is there from British Period and after nationalization; it has come fully
under Government. In the post liberalization era, insurance has attracted any private players
from different parts of the country to start business India. India as a country has potential for
growth of this business. With the upcoming of regulator in the year 2000, the business in
India became more streamlined. Large players along with customer choice results severe
competition Life Insurance Corporation of India in one end and ICICI Prudential life
insurance from private sector on the other end has taken maximum market share from both
category. Product innovation, profitable growth, multi-channel distribution and ethical
practices in business are few factors to be considered. In this situation, a brief study of the
above sector is required.

Objectives of the study

 To study the present life insurance scenario and their growth drivers in India
 To study the present trends in life insurance sector
 To study the challenges and opportunities of insurance sector in India
 To suggest feasible measures for improvement in the sector

Research methodology
Corresponding Author:
Dr. CH Vishnu Murthy Exploratory research methodology is used here to analyze the data. Data was collected from
HOD and Assistant Professor, multiple sources such as books, journals to understand the Life insurance industry. In this
Department of Commerce, Dr. paper, we have referred previous research articles. Apart from this, we have visited different
V.S. Krishna Govt. Degree & websites and professional magazines. Some more data was collected through personal and
PG College (A)
telephonic interviews and discussion with leading corporate people. So it is purely based on
Visakhapatnam, Andhra
Pradesh, India available secondary data.

~ 156 ~
Asian Journal of Management and Commerce https://www.allcommercejournal.com

Indian life insurance at a glance policies. Premium paying term linked distributors'
Life insurance is an important financial product like commission will promote long-term nature of insurance
banking, pension and others. Life insurance provides products.
protection to life and non-life areas. It is one of the fastest
growing industries in India. As per Swiss Re report in 2011, Growth drivers of life insurance industry
India’s ranking in world insurance market was 15th which From the literature review and market experience, it is clear
was lowered than previous year and share of the market was that many factors are responsible for the robust growth of
1.58% of the world market share. At present, there are 23 this sector. The major are as follows
players in life insurance sector in private and 1 is in Public
enterprise which is LIC. Life Insurance Corporation is the Growing Economy: The economy of India is growing
market leader. In 2011, its market share was lowered to significantly. The second populous country has witnessed a
69.78%. Among private players, ICICI Prudential life phenomenal growth in major financial services. Various
insurance stood first. government schemes and programs also helped a lot. The
The industry gained momentum after the regulator, purchasing power of people has increased. Also increase in
Insurance Regulatory and Development Authority (IRDA) income has augmented the disposal income among people.
came into existence. They made standard rule for all the Good saving and awareness among various sources of
players. Apart from Life insurance Corporation, many getting the products have compelled the people to go for
private players have shown interest to start business in specialization rather than generalization. It is estimated that
India. At present we have 23 players leaving the PSU major, by 2026, the working population which ranges n the age
LIC. group of 25 to 40 will reach approximately 795.5 million.
Between 2001-10, the phase was characterized by a period
of high growth (CAGR of 31 percent in new business Rural as a major thrust: More than 70% of population
premium between 2001-10) and a flat growth (CAGR of lives in rural area. At the same time their consumption
around 2 percent in new business premium between 2010- pattern, choice and preference has changed. Technology and
12) (source: KPMG). There was exponential growth in the internet has given ample scope for rural people towards
first decade of insurance industry liberalization the back of adopting new ideas. All these forces provided a larger
innovative products and aggressive expansion of platform to multinational players to focus more on rural.
distribution, the life insurance industry grew at jet speed. After 2005, the regulator had come with micro insurance
However, this frenzied growth also brought in its wake specially designed for rural people with low premium and
issues related to product design, market conduct, complaints high coverage. The pattern of distribution and pricing is also
management and the necessity to make course correction for suitable for rural people with micro insurance. In order to
the long term health of the industry. Several regulatory foster growth, Govt. also made mandatory to do certain
changes were introduced during the past two years and life percentage of policies every year from rural area for the
insurance companies adopted many new customer centric insurance companies. All these steps provide new avenues
practices in this period. Product related changes, first in for the players to think growth more in rural area.
ULIPs in September 2011 and now in traditional products
will have the biggest impact on the industry. Development of other insurance: Apart from life
The new guidelines for both linked and non-linked products insurance, there is strong growth in auto sector from 2003 to
will now come into force from the beginning of year 2014, 2010. The no of passenger and commercial vehicles has
an extension of three months from earlier specified date. increased incrementally. As a result, the motor insurance
This additional period will ensure that life insurers enter the has become more popular among people. Health insurance
crucial quarter of Jan-Mar with a full bouquet of products has created a separate portfolio in the last few years. People
and the sellers are well trained in the nuances of all these have realized the importance of this due to rise in the
new products. healthcare cost. Introduction of Technology in medical
These product guidelines are in line with the IRDA's science and demand for good service is the main cause for
regulatory theme of customer orientation and long-term higher medical cost. Awareness about the health due to
nature of the life insurance business. The guidelines follow various schemes and non-government intervention has
two overarching themes of providing Guarantee and enlarged the vision of the people about health care. Rastriya
enhancing Transparency. The major changes introduced Swathya Bima yojana (RSBY) of 2007 is one of the mile
include - Higher Death Benefit, Guaranteed Surrender stone in this area where people below poverty line are able
Value and mandatory Benefit Illustration for all life to get minimum health service.
insurance products. These changes related to death benefit
and surrender value may marginally reduce the customers' Other growth drivers: The demand for insurance products
overall maturity benefit i.e. policy IRR, especially at higher is likely to increase due to the exponential growth of
ages but will ensure that life insurance serves the purpose of household savings, purchasing power, the middle class and
providing life cover which no other financial instrument the country’s working population. Listed below, are the
offers. All ULIPs are currently sold mandatorily with a various underlying growth drivers for India’s insurance
personalized Benefit Illustration. This requirement is now industry:
being extended to other product forms. The new guidelines  Growing of the financial industry as a whole
have also provided for setting up a 'With Profit Committee'  Growth of life and non-life industry
at the board level. While personalized benefit illustration  Promoting innovation and removing inefficiency
will provide for greater transparency in the pre-sales  Competition and orderly growth
discussion, the With Profit Committee is likely to lead to  Growth of specific insurance segments such as motor
greater governance in the administration of Participating insurance

~ 157 ~
Asian Journal of Management and Commerce https://www.allcommercejournal.com

Changing trends in life insurance policy Have resulted in more focus & penetration of insurance in
Along with the other objectives of insurance like financial the Country
security, tax benefits etc. one of the major objectives is
saving and investment. Traditional life insurance policies Challenges and opportunities
like endowment were becoming unattractive and not The insurance industry in India faces challenges that need to
meeting the aspirations of the policyholders as the be addressed in order to ensure elevated growth. There is
policyholder found that the sum assured guaranteed on significantly more population living in rural areas than in
maturity had really depreciated in real value because of the urban areas. According to the estimates of the World Bank,
depreciation in the value of money. The investor was no roughly 65% of the population lives in these areas. The
longer content with the so called security of capital provided issues arise because there are relatively few buyers as well
under a policy of life insurance and started showing a as sellers of insurance in rural areas. Some of the main
preference for higher rate of return on his investments as reasons for its low penetration in India include inadequate
also for capital appreciation. It was, therefore found insurance awareness, gaps in product understanding, and the
necessary for the insurance companies to think of a method value of the return on investment of the insurance
whereby the expectation of the policyholders could be purchased. Another significant challenge is getting
satisfied. The objective of providing a hedge against the insurance distribution to every area within the last mile.
inflation through a contract of insurance pushed insurer to However, not everything is doom and gloom.
link the insurance policy with market and thus the industry The Covid dramatically increased public awareness of
observed the beginning of Unit linked insurance policy health insurance, resulting in a surge in policy purchases.
(ULIP). The other insurance products, however, still experience slow
The history of insurance in India is deeply rooted, and the growth. Insurance penetration in India during 2021–22 was
journey extends over 200 years. Business-wise, life 4.2 percent, which remained the same as in 2020–21,
insurance was introduced in 1818 when the Oriental Life according to the Annual Report of IRDAI. However, in
Insurance Company launched in Calcutta. However, during India, a number of regulatory changes are being
this era, the market was dominated by foreign insurance implemented to boost the penetration of insurance, boost
offices. Then, in 1912, the Indian Life Assurance capital inflow, boost valuation, and ease the entry of small,
Companies Act emerged as the first statutory body to specialised, and niche players. The increase of the FDI, the
regulate life insurance in India. The nationalisation of the General Insurance Business Amendment Bill (August
insurance sector happened in January 1956 with the 2021), the introduction of the National Health Stack, and
emergence of LIC (Life Insurance Corporation), which disbursing huge amounts of capital for the development of
subsequently absorbed a total of 245 Indian and foreign the industry are some of the key examples. As a result,
insurers. Until the 1990s, the LIC had a monopoly in the today, with the entry of private players who are targeting the
market until the insurance sector reopened for the private underinsured market and the rising use of the new
sector and the changes started to show up. distribution, the long-term expansion of the industry has
With the recommendations of the Malhotra Committee, been facilitated by the use of new distribution methods and
IRDA (the Insurance Regulatory and Development technological advancements.
Authority) was incorporated in early 2000 as a statutory
body to regulate the insurance industry, and it changed the Emerging trends
landscape of the industry irrevocably. Over the past two  Multi-distribution i.e. increasing penetration through
decades, the insurance market in India has experienced new modes of distribution such as the internet, direct
impressive growth, thanks to increased private sector and telemarketing and NGOs
involvement, better distribution capabilities, and significant  Product innovation i.e. increased levels of
increases in operational efficiency. The insurance sector has customization through product innovation
never looked back since the sector underwent liberalisation,  Claims management i.e. timely and efficient
and it is now one of India’s most competitive and management of claims to prevent delays which can
developing industries. Today, there are 34 general insurance increase the claims cost
companies and 24 life insurance companies, according to  Profitable growth i.e. expanding product range,
IRDAI. Furthermore, the total addressable market (TAM) in developing innovative products and expanding
FY 22 was $66.5 billion, according to Redseer Consulting, distribution channels
and it is anticipated to reach $222 billion by FY 26. Despite  Regulatory trends i.e. mandated regulatory changes by
the stunning numbers, India is underinsured as a country. the IRDA to promote a competitive environment in
Three separate milestone events: both the life and non-life insurance sectors
 Nationalization of General Insurance Companies during
Future looks good
1972, where in 107 insurers were grouped and
India continues to be a country of savers though we have
amalgamated into four Companies – National Insurance
witnessed a decline in the household savings rate in the past
Co. Ltd., The New India Assurance Co. Ltd., The
couple of years. In India, the problem lies in household
Oriental Insurance Co. Ltd. and United India Insurance
savings lying idle or getting invested in saving instruments
Co. Ltd
that does not help them achieve their life stage goals. There
 IRDAI opened the market for private insurance
is a worrying trend of larger portion of household savings
companies in the year 2000, that helped boost insurance
getting into non-productive physical assets such as real
penetration in the country
estate and gold.
 Introduction & licensing of standalone health insurance
But even then, the future looks interesting for the life
companies by IRDA in the year 2006
insurance industry with several changes in regulatory

~ 158 ~
Asian Journal of Management and Commerce https://www.allcommercejournal.com

framework which will lead to further change in the way has helped agency to increase the revenue. At the same
industry conducts its business and engages with its time, we have also taken the help of rural development
customers. World over it has been observed that the life organization such as NGOs, Trust and SHG members to
insurance industry does behave in a counter cyclical manner cover the rural area. Finding the right distribution channel
in many cases e.g. in a situation where the economic growth for the customer is a trouble area. All these have demanded
is slowing down, due to other factors such as high current a high skill in management.
account and fiscal deficits, currency depreciation, high
interest rates, savings rate will continue to be high, leading Difficulty in designing Marketing Mix: Marketing mix
to higher demand for life insurance. Life insurance is a big refers the combination of all P‟s to make the market
savings vehicle along with banking in such uncertain attractive. Innovation in product which invited many unit
economic environment and so we expect the industry to fare linked policies was the centre of attraction for all. Low
reasonably well. Demographic factors such as growing premium due to large no of players sometimes were
middle class, young insurable population and growing uncomfortable for all. The entire banking industry is
awareness of the need for protection and retirement advanced in the communication strategy. This has
planning will also support the growth of Indian life compelled insurance players to practice innovative
insurance. communication strategy including advertisement. So is not
only product, but a balanced marketing mix is required for
Insurance industry - way forward the industry with modern trend.
The Indian insurance market is poised for strong growth in
the long run. It stands at the threshold of moving towards a Regulatory trend: The Indian regulator has introduced
stable position, delivering “stable profitable growth.” rules and regulation from to time to control the entire
industry. Recent changes in the cap on ULIP charges have
Significant latent market: The insurance market has a created havoc and the contribution of ULIP to entire policy
considerable amount of latent potential, given the fact that has decreased. In order to provide better service, the
the Indian economy is expected to do well in the coming regulator has come with few changes. Servicing of orphan
decades leading to increase in per capita incomes and policy, more focus on long term are few examples where the
awareness. insurer are finding difficult. Standardization of the proposal
form is another step by regulator. So the insurers are facing
Channelizing industry focus: In meeting the significant many challenges in the area of product, price, distribution
potential, the industry has an increased role and and taxation.
responsibility. Three areas of focus could be-a) product
innovation matching the risk profile of the policy holders b) On line policy: Internet and technology has helped a lot to
reengineering the distribution and more significantly c) insurer. Now policy procuring through on line is cheaper
making sales and marketing more responsible and than buying the same plan from agent. The major problem is
answerable. not getting the support from the agent for that policy, if
there is a claim or maturity. The person has to keep direct
Distribution: Distribution channels evolved in response to contact with the company.
market dynamics and changing consumer preferences. The
alignment of economic incentives with distribution Claim Management: From 2010, the no of advisors have
dynamics should be driven by market forces rather than decreased in the industry. The no of agents declined 29%
regulatory intervention. from March 2010 to March 2013. Also it is expected that
more agents will leave the industry. Under this situation,
Regulation: The industry should be given time to adjust to Claim management will be tougher for the companies. As
regulatory changes in a phased manner aligned with a people buy insurance because of the face value of agents,
regulatory impact assessment. Regulations need to drive assistance of them is highly essential for good business
transparency and simplification of products and services.
The stakeholders should eventually work toward Customer Servicing: From the year 2013, it is very clear
maintaining a favorable environment for stable growth, that traditional plans have gained more weightage over
increasing the penetration of insurance to rural and ULIP. As traditional plans are long term products, insurer
underpenetrated areas and increasing the contribution to the need to focus more on this. Customer retention and
economy. servicing is the key to remain in business. Even if in new
pension plan, the capital protection features demands more
Major findings policy servicing. Here investment and servicing are
Hybrid distribution channel: In the life insurance important for the companies. Above all, Policy
industry, the prominent distribution was agency. Around administration is the most difficulty area to provide
90% of businesses were coming from them. The high cost customer servicing.
and low persistency in policy has thought of going to other
channels known as alternate channels. Recently the FDI and growth: Foreign direct investment and insurance
contribution from alternate channels is increasing. In this industry is more debated and controversial one, the proposal
context, Bank assurance increased and the no of banks as to hike it from 26% to 49% is long term pending with
insurance partner has gone up. Both Public sector banks and government. In a first major reforms initiative by the Modi
Private Banks have come up with their insurance partners. Government gave a go-ahead to FDI cap hike in insurance
Broking and corporate agency has their own way of doing to 49 per cent with a rider that management control will
the business. Individual and institution as corporate agents remain in the hands of Indian promoters. Insurer are finding

~ 159 ~
Asian Journal of Management and Commerce https://www.allcommercejournal.com

easy to continue investing in business. Additional fund is profitability; c2013. Available from:
highly required for this capital intensive industry. www.kpmg,com./in, [15 May 2014]
4. BCG, India Life Insurance: Negotiating the
Recommendations troublesome teens; c2013. Available from:
From the above discussion on findings, we came across few www.bcg.com. [16 May 2014]
novel ideas. Life insurance in India is in growing stage and 5. Jain A. Global Trends in Life Insurance: Policy
to maintain it, the following five points‟ are to be Administration Key policy administration trends and
considered their implications for the life insurance industry”,
 Corporate must go to the basics of service marketing Capgimini; c2011. Available from:
such as “under promise and over delivery” www.capgemini.com/insurance, [16 May 2014]
 Customization of offerings, mainly in product and 6. Annual report, Insurance Regulatory and development
distribution authority (IRDA), Govt of India; c2012. Available
 “Pockets of service” is to be done for quicker service from: www.irda.gov.in, [16 May 2014]
and other operation 7. Ernst, Young. Insurance industry: Challenges, reforms
 Advanced knowledge in the insurance is to be imparted and realignment; c2012. Available from:
to the employees in Insurance industry www.ey.com/in, [16 May 2014]
 “Digitalization and Relationship” is to be kept in policy 8. Zeithaml V, Bitner M. Services Marketing, Third
marketing Edition, Tata Mc-Graw-Hill Publishing Company
Limited, New Delhi; c2003. p. 60-80.
Conclusion 9. Annual report of IRDA, 2003-04, 2004-05, 2005-06,
The insurance industry plays a vital role in the financial 2006-07, 2007-08.
sector. The insurance companies, with their accumulated 10. Annual report of LIC, 2003-04, 2004-05, 2005-06,
funds from premiums, invest in ways that contribute to the 2006-07, 2007-08
growth of the economy. Life insurance business in India 11. www.dipp.nic.in
needs a special care as compared to other business. This 12. www.irda.gov.in
industry is going to face more challenges due to change in 13. www.irdaindia.org
economy and employment. More no of players around the 14. www.licindia.com
world have planned to enter into India looking to the
potential available here. Probably understanding the
customer expectation and attitude for this product is the
important. There is time to re-engineer the business model.
For life insurance, it is time to re-commit itself to customer
centric behavior, product solutions based on consumer
needs, ethical market conduct, transparency and governance,
the growth will be the natural outcome for now and years to
come. Despite strong improvement in penetration and
density in the last 10 years, India largely remains an under-
penetrated market. The market today is primarily dependent
on push, tax incentives and mandatory buying for sales.
There is very little customer pull, which will come from
growing financial awareness and increasing savings and
disposable income. In the long run the insurance industry is
still poised for a strong growth as the domestic economy is
expected to grow steadily. This will lead to rise in per capita
and disposable income, while savings are expected to be
stable. The future of the insurance industry in India looks
promising owing to several changes in the regulatory
framework, technological advancements, government
support, and increasing awareness. The insurance industry
in India is likely to introduce new trends like product
innovation, multi-distribution, better claims management,
and regulatory trends in the Indian market as incomes rise
and purchasing power and household savings grow
exponentially. According to a recent research report by
Swiss Re, the Indian insurance industry is poised to become
the sixth largest market by 2032.

References
1. Gupta P. Insurance and risk Management, Second
edition, Himalaya Publishing House; c2011.
2. IC 33, Life Insurance, (New Syllabus), Insurance
Institute of India, Mumbai, India; c2007.
3. KPMG, Insurance Industry – Road Ahead, Path for
sustainable growth momentum and increasing

~ 160 ~