NewsBytes
    Hindi Tamil Telugu
    More
    In the news
    Mukesh Ambani
    WhatsApp
    Reliance Jio
    OPPO
    Vivo
    Sensex
    Bitcoin
    NewsBytes
    Hindi Tamil Telugu
    NewsBytes
    User Placeholder

    Hi,

    Logout


    India Business World Politics Sports Technology Entertainment Auto Lifestyle Inspirational Career Bengaluru Delhi Mumbai Visual Stories Find Cricket Statistics Phones Reviews Fitness Bands Reviews Speakers Reviews

    Download Android App

    Follow us on
    • Facebook
    • Twitter
    • Linkedin
     
    Home / News / Business News / Private insurance players struggling to make profits
    Business

    Private insurance players struggling to make profits

    Private insurance players struggling to make profits
    Written by Ramya Patelkhana
    Edited by Mansi Motwani
    Jan 18, 2017, 05:21 pm 3 min read
    Private insurance players struggling to make profits
    Credits

    According to media reports, the future of the Indian insurance industry doesn't look bright. People today are not accepting insurance as one of the preferred instruments for savings. The slow acceptance of insurance as an essential protection against unexpected incidents that could leave them in financial distress is also a contributing factor. Not many private players in the insurance industry are making profits.

    Private insurance players struggling to make profits

    According to media reports, the future of the Indian insurance industry doesn't look bright. People today are not accepting insurance as one of the preferred instruments for savings. The slow acceptance of insurance as an essential protection against unexpected incidents that could leave them in financial distress is also a contributing factor. Not many private players in the insurance industry are making profits.

    The growth of the insurance sector is decreasing

    Even after high foreign direct investments for about a decade and private players' participation in the industry since 2000, several businesses in the sector are running in losses. Once considered an unexplored market with less than 30% of the population insured, the industry is now facing an uncertain future. During 2000-08, the sector grew 35% but later plummeted to 6-8% growth.

    Unit-Linked Insurance Plans

    The insurance industry's growth slowed down reportedly after Mutual Fund Equity investment was packaged as insurance under the name of Unit-linked Insurance Plans, commonly known as ULIPs. ULIPs were insurance distributors' favorite as they offered a commission as high as 35%.

    Domination by the bancassurance channel

    In the early 2000s, insurers had a potential to grow but because of their "short-sightedness and regulatory flip-flops", customers had to bear the brunt of the misdeeds. Some of the early entrants are struggling to gain significant market size despite existing for over 15 years. The domination by some of the 'bank insurance' channel players to sell insurance is also one of the reasons.

    Insurers unable to draw enough customers

    Several insurers are making losses as they are unable to reach out to potential customers in the first place. HDFC Life, ICICI Prudential Life, and Max Life succeeded because of HDFC Bank's distribution strength, ICICI Bank's power, and Axis Bank's distribution deal respectively.

    LIC of India dominates the industry

    The Indian life insurance industry, which has 24 companies, even today is dominated by the state-run Life Insurance Corporation (LIC) with a market share of 50%. The next highest market share of 30% is enjoyed by the top four private insurance players. The other 19 private companies - that mostly suffer losses - are left to fight for the remaining 20% market share.

    Insurance sector to go the telecom way?

    The only way forward for the insurance sector is to go the telecommunication way where the stronger players eventually bought smaller ones. The insurance sector is reportedly going through the same phase as the telecom sector during 1990-2000. In the first round, there were 17 licensed telecom players, later in the next round there were 23; currently, there are only 6-7 telecom operators.

    HDFC Life-Max Life merger to lead to more consolidations

    The HDFC Life-Max Life merger is reportedly expected to lead to more consolidations in the sector. Other potential consolidation candidates could be Birla Sun Life, Bajaj Allianz, and Future Generali. 'Insurance Regulatory and Development Authority' asking the companies to get listed to bring more transparency, could also force them to consolidate. Marginal companies need deep-pocketed buyers for the required financial strength to get listed.

    Share this timeline
    Facebook
    Whatsapp
    Twitter
    Linkedin
    India
    Life Insurance Corporation of India
    LIC

    India

    RBI unveils new lightweight payment system: Why is it needed Reserve Bank Of India (RBI)
    India records 425 COVID-19 cases, 3 deaths in 24 hours COVID-19
    Weather news: Monsoon likely to be normal, predicts IMD India Meteorological Department (IMD)
    US Defense Secretary Lloyd Austin to visit India next week Lloyd Austin

    Life Insurance Corporation of India

    Why LIC share continues to struggle a year after IPO  Business
    Adani-Hindenburg row: Congress launches nationwide protest, calls for probe Congress Party
    Regulators monitoring Adani-Hindenburg crisis, FPO pullout hardly impacted economy: Sitharaman Nirmala Sitharaman
    Ruckus in Parliament as Opposition demands discussion on Adani-Hindenburg row Parliament

    LIC

    Hindenburg report under evaluation, Adani Group would be questioned: LIC Life Insurance Corporation of India
    #NewsBytesExplainer: What is LIC's new pension scheme for senior citizens India
    LIC records 18% fall in standalone net profit; announces dividend Initial Public Offering (IPO)
    LIC IPO debuts on Dalal Street at discounted price Bombay Stock Exchange (BSE)

    Love Business News?

    Subscribe to stay updated.

    Business Thumbnail
    Indian Premier League (IPL) Celebrity Hollywood Bollywood UEFA Champions League Tennis Football Smartphones Cryptocurrency Upcoming Movies Premier League Cricket News Latest automobiles Latest Cars Upcoming Cars Latest Bikes Upcoming Tablets
    About Us Privacy Policy Terms & Conditions Contact Us Ethical Conduct Grievance Redressal News News Archive Topics Archive Download DevBytes Find Cricket Statistics
    Follow us on
    Facebook Twitter Linkedin
    All rights reserved © NewsBytes 2023