Insurance Sector
Time Leveraging Time Indian Insurance Sector Innovate Now Or Stagnate
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December 2011 www.deloitte.com/in
Contents
Indian Insurance sector poised for its next stage of growth The puzzle of untapped potential Redefining Customer Value Proposition Improving Operational Performance Key challenges in leveraging Innovation Improving the Innovation Quotient Conclusion Contacts 1 2 3 6 7 8 12 13
Indian Insurance sector poised for its next stage of growth
The insurance sector in India has grown at a fast rate post-liberalization in 1999. In the last decade, total premium grew at a CAGR of 25% and reached a total of $67 billion in 2010. Indian Life insurance industry (which contributes 88% of total Life and General insurance premium in India) has emerged as the 9th largest life insurance market in the world. Yet, Insurance penetration (measured as ratio of premium underwritten to GDP) was only at 5.2 % in 2010 – significantly lower than Asian peers like South Korea, Taiwan, Japan and Hong Kong which boast an insurance density greater than 10%. 1 With low insurance penetration levels, growth potential remains promising. More importantly, the pace and nature of growth will likely see a change where new behaviours and dynamics of demand and supply will apply. On the demand side, growth is being fuelled by the growing population base, rising purchasing power, increased insurance awareness, increased domestic savings and rising financial literacy. The suppliers are correspondingly playing a market making role as competition heightens and differentiation become necessary for profitable growth. In the new order, innovating across the business lifecycle has become a necessity.
1
Source: IRDA Annual report 2010
Indian Insurance Sector Innovate Now Or Stagnate
1
The puzzle of untapped potential
While the growth in Insurance industry has been at 25% in the past decade, a closer look suggests that this growth has come at a cost. Private
fasfdor
December 2011 www.deloitte.com/in
Contents
Indian Insurance sector poised for its next stage of growth The puzzle of untapped potential Redefining Customer Value Proposition Improving Operational Performance Key challenges in leveraging Innovation Improving the Innovation Quotient Conclusion Contacts 1 2 3 6 7 8 12 13
Indian Insurance sector poised for its next stage of growth
The insurance sector in India has grown at a fast rate post-liberalization in 1999. In the last decade, total premium grew at a CAGR of 25% and reached a total of $67 billion in 2010. Indian Life insurance industry (which contributes 88% of total Life and General insurance premium in India) has emerged as the 9th largest life insurance market in the world. Yet, Insurance penetration (measured as ratio of premium underwritten to GDP) was only at 5.2 % in 2010 – significantly lower than Asian peers like South Korea, Taiwan, Japan and Hong Kong which boast an insurance density greater than 10%. 1 With low insurance penetration levels, growth potential remains promising. More importantly, the pace and nature of growth will likely see a change where new behaviours and dynamics of demand and supply will apply. On the demand side, growth is being fuelled by the growing population base, rising purchasing power, increased insurance awareness, increased domestic savings and rising financial literacy. The suppliers are correspondingly playing a market making role as competition heightens and differentiation become necessary for profitable growth. In the new order, innovating across the business lifecycle has become a necessity.
1
Source: IRDA Annual report 2010
Indian Insurance Sector Innovate Now Or Stagnate
1
The puzzle of untapped potential
While the growth in Insurance industry has been at 25% in the past decade, a closer look suggests that this growth has come at a cost. Private