India’s economy is stuttering under high inflation and slowdown. These challenges coming together in partnership is unprecedented, ever since the insurance sector deregulation was initiated in 1999 and free-market reforms in the early 1990s.
The life insurance industry has always played a supportive role in boosting the economy, essentially owing to its inherent stablility-driven structure of being “long term” in its approach and having the ability to provide long-term finance (especially to infrastructure sector).
At present, India has over 50 crore people without any insurance. This provides ground for the life insurance industry to grow steadily.
One of the significant budget proposals announced by finance minister Arun Jaitley was hiking foreign direct investment in insurance to 49 per cent from 26 per cent through the FIPB route with full management control remaining with Indian companies. This will positively impact the capital-intensive sector.
Over the last decade, the life insurance industry has mobilised more than Rs 33,000 crore of long-term investment capital, with foreign capital of more than Rs 6,000 crore as on March 31, 2014. This helped in improving penetration (measured as premium to GDP ratio) from 2.15 per cent in 2001 to 4.60 per cent in 2009, before slipping to 3.17 per cent in 2012.
With an increase in FDI, the industry stands to receive capital inflow of around Rs 50,000 crore from existing and new players by 2020. This will increase branch network from 10,000 to 30,000 by that year and employment opportunity to 6 lakh from 2 lakh, besides extending reach to rural people.
The author is secretary-general, Life Insurance Council