India is set to have the fastest-growing markets for the next five years amongst G20 countries with 7.1 per cent real-term growth in total insurance premiums, suggested a recent Swiss Re report.
The insurance business in India has witnessed many changes since it was first introduced in 1818 with the establishment of Oriental Life Insurance Company.
With private and public sector players, the insurance market in India has two major segments: life insurance (term, whole life, endowment, and unit-linked insurance plans) and general insurance (vehicle insurance, health insurance, etc.). The report also mentioned that the life insurance segment is expected to grow at a rate of 6.7 per cent over the period.
This growth is attributed to increased demand for term life insurance amongst the middle class and the adoption of ‘insurtech’.
Insurance Industry of India
Currently, there are 57 insurance companies, including life and general insurers, in India. Life Insurance Corporation of India (LIC) is the only public sector company amongst the 24 life insurers in the market. Notably, General Insurance Corporation of India (GIC Re) is the sole national reinsurer. Other stakeholders include surveyors, brokers, third-party administrators and agents.
With an impressive growth rate over 20 years, the insurance sector witnessed greater participation from private players and improved distribution capabilities and operational efficiencies. According to the Insurance Regulatory and Development Authority of India (IRDAI), life insurers collected 18 per cent more premiums in FY23 against the previous year.
What Drives Insurance Purchases in India?
IRDAI has projected the Indian insurance industry to reach $222 billion by 2026, becoming the sixth-largest insurance market in the world. While the COVID-19 pandemic highlighted the role of insurance in creating a financial safety net, the industry has benefited from the thriving economy and evolving demographics.
Other than these, India’s young population, with 55 per cent in the age group of 20-59 in 2020, has contributed to the growth of the insurance market in India. Also, increasing disposable income is driving insurance purchases in the country. Notably, India will add 140 million middle-income and 21 million high-income households by 2030. Besides, growing financial awareness, increased distribution of rural insurance, robust regulatory support and technological advancements have also played a role in the sector’s growth.
Private Sector Participation
India opened doors for private players in the insurance sector in 2000. In 2014, the foreign direct investment (FDI) limit was raised to 49 per cent from 26 per cent. The introduction of private insurers has made the insurance sector in India see vibrant expansion and growth.
As per IRDAI, the premium in March 2023 for private insurers grew at 35 per cent on a year-on-year basis and 20 per cent for FY23. This speaks volumes about the private sector’s participation in the Indian insurance market.
Talking about ACKO, a tech-first insurance company registered with IRDAI, has issued more than 8 crore policies and insured over 2.8 crore people. Further, the Bengaluru-based insurtech unicorn has plans to disrupt the market with its life insurance products.
The Importance of Life Insurance
First and foremost, life insurance products are considered an integral part of robust financial planning. Safeguarding family members with a financial safety net brings peace of mind and frees policyholders from worrying about what will happen to their loved ones in their absence. Life insurance offers the much-needed financial support to bereaved family members to become self-reliant and independent. In addition, life insurance plans help pay off debts and protect assets. That is why it is vital to consider all the liabilities while deciding on the right sum assured.
Further, many life insurance plans allow policyholders to either save money for life goals or build a retirement corpus. Many life insurance products also cover critical illnesses due to increasing lifestyle diseases. The insurer pays a lump sum for the treatment purposes.
Last but not least, life insurance premiums are eligible for a tax deduction of up to Rs 1.5 lakh in a financial year as per Section 80C of the Income Tax Act under the Old Regime. Also, the amount received by beneficiaries is not taxed under Section 10 (10D) of the IT Act.
Introducing ACKO Life Flexi Term Plan
Having insurance products for varied needs, ACKO saves its customers from the hassle of dealing with agents and third-party aggregators. With ACKO insurance products, customers save significantly on premiums as there is no middleman involved. While the customer support team works 24/7, the ACKO app is designed to provide a hassle-free, paperless insurance experience.
ACKO Life Flexi Term Plan is a flexible life insurance policy that can be customised to one’s unique needs. Policyholders get to increase or decrease the sum assured and the policy tenure as per the changes in their lives.
For instance, Varun secured ACKO Flexi Term Life Plan with a coverage of Rs 1 crore at the age of 30 when his annual income was Rs 10 lakh. After 5 years, he decides to increase the coverage to Rs 2 crore owing to the increased responsibilities of raising two kids and paying off a home loan of Rs 50 lakh. At the age of 45, he decides to re-adjust the coverage to Rs 1 core again because the home loan has gotten over.
Choosing the Right Life Insurance Policy
While buying a life insurance policy, assessing one’s life insurance goals and calculating the optimal coverage needed accordingly is important. Also, shortlist policies and compare quotes to find the best one. An online life insurance premium calculator can be used for this purpose. After zeroing in on a policy from a reputable insurer, go through the policy documents meticulously.
It is suggested to buy life insurance at an early age even if fit has lower coverage. This way, one can save on premiums. It is possible to enhance coverage later in life by adding riders, such as critical illness, disability income, and accidental death benefit riders. Further, experts advise evaluating life insurance needs regularly.
Notably, a life insurance policy that accommodates one’s individual needs, contributes to achieving financial goals and stays relevant for long-term planning can be tagged right.
As the insurance market is growing in India, it is becoming more accommodative of consumer needs. Private and public sector insurance companies are not just focused on offering innovative, flexible products but also utilising the latest technologies to improve their services to make the experience better for everyone involved.
