Rural, semi-urban life insurance to jump $20 bn
New Delhi, May 14: The rural and semi-urban life insurance business is expected to touch 20 billion dollars, while the non-life insurance will increase to 15 billion dollars by 2010, an ASSOCHAM study said today.
According to the paper -- 'Insurance Sector: Its Future Perspective', released by the Associated Chambers of Commerce and Industry, in the urban areas life insurance businesses is anticipated to reach 15 billion dollars, while non-life insurance, 10 billion dollars.
The Paper has also projected a 500 per cent increase in the size of the current Indian insurance business from 10 billion dollars to 60 billion dollars by 2010.
Releasing the Paper, ASSOCHAM President Anil K Agarwal said, ''The study has revealed that rural and semi-urban India shall contribute 35 billion dollars to the Indian insurance industry by 2010, including 20 billion dollars by way of life insurance and the rest 15 billion dollars through non-life insurance schemes''.
He added further that a large part of rural India is still untapped due to poor distribution, large distances and high costs relative to returns. ''Urban sector insurance is estimated to reach 25 billion dollars by 2010, life insurance 15 billion dollars and non-life insurance 10 billion dollars,'' he said.
Estimating the potential of the Indian insurance market from the perspective of macro-economic variables such as the ratio of premium to GDP, the paper reveals that India's life insurance premium, as a percentage of GDP is 1.8 per cent as against 5.2 per cent in the US, 6.5 per cent in the UK or 8 per cent in South Korea.
Further, according to the study, in the coming years, the corporate segment as a whole will not be a big growth area for insurance companies because penetration is already good with companies receiving good services.
In both volumes and profitability therefore, the scope for expansion is modest. The paper suggested that the insurer's strategy should be to stimulate demand in areas that are currently not served at all. Insurance companies mostly focus on the manufacturing sector, however, the services sector is taking a large and growing share of India's GDP, offering immense opportunities for expansion opportunities.
Being an agrarian economy again, there are immense opportunities for the insurance companies to provide the liability and risks associated in this sector. Rural markets offer exciting opportunities for insurance companies.
To understand the prospects for insurance companies in rural India, it is very important to understand the requirements of India's villagers, their daily lives, their peculiar needs and their occupational structures.
The paper found that there are a total 124 million rural households. Nearly 20 per cent of all farmers in rural India own Kissan Credit cards. The 25 million credit cards used till date offer a huge data base and opportunity for insurance companies.
An extensive rural agent network for sale of insurance products could be established, where the agent can play a major role in creating awareness, motivating purchase and rendering insurance services.