Mumbai, Aug 12 (UNI) Indian general insurance industry is passing through a challenging phase following de-tariffing of most segments since January 2007, according to an international rating agency.
With price-based competition being intense in the post de-tariffed scenario, concern for market share is likely to override price discipline in the industry in the near term, ICRA said today in a release.
It said that earlier, private players were growing largely at the expense of the incumbent public sector entities. More recently, there has been a churn in market share among the private sector players as well.
However, with the top eight players accounting for 92 per cent of the total business, the industry remains fairly concentrated by international standards.
ICRA notes that expenses for business acquisition have been on the rise because of the intense competition prevailing in the industry.
With growth shifting towards retail lines, private players are incurring higher initial expenditure in expanding their networks.
Over the medium term, ICRA expects the fight for market share to move towards service quality and transparency, which in turn would allow the industry to focus on sustainable attributes like service quality, and product- and risk-based pricing.
ICRA believes the long term business outlook for the industry is positive, given the currently low levels of penetration, especially in retail lines.
However, in the short to medium term, however, competitive pressures are likely to have a significant impact on profitability and capital requirements for business.
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