Insurance Digital Premiums a $37 Bn Market by 2025: JM Fin
Online insurance sales for new business, which are in a nascent stage in the country, are fast catching up and are likely to grow at a CAGR of 13 per cent to become a Rs 2.6 trillion ($37 billion) opportunity by 2025, according to a recent report by JM Financial.
The report said the market size of online insurance business in India is currently pegged at Rs 1.1 trillion ($15 billion). While a major proportion of online sales will come from life insurance renewal premiums (estimated at 94 per cent in FY19), digital sales of non-life insurance policies are gaining traction and may impact volumes more than the value, as ticket sizes are relatively small, the report points out.
Interestingly, the share of life insurance (renewal) premium in the digital premium space will come down to 85 per cent in FY25 from 94 per cent in FY19 while the share of motor insurance will go up to 5 per cent from 3 per cent, life - new business premium (NBP) to 4 per cent from 3 per cent, others and health insurance will go up to 3 per cent and 2 per cent, respectively from 1 per cent each between FY19 and FY25, the study estimates.
With insurance market moving online form offline, the commission generated by on-line insurance aggregators are expected to touch Rs 38.5 billion by 2025, according to the research report by JM Financial.
The main beneficiaries of the digital shift in the insurance premium space will be the aggregators and banks as the commissions generated for selling insurance products on-line will grow substantially with the growth in volume.
The report estimates that the market for commissions will post a CAGR of 34 per cent from an estimated Rs 8.4 billion ($120 million) in FY19 to $690 million by FY25. This growth is likely to come from the increasing share of online policy distribution by web aggregators, taking the web aggregator market from an estimated Rs 4.5bn ($65 million) in FY19 to Rs 38.5 billion ($550 million) by FY25F growing at a CAGR of 43 per cent.
The insurance under-penetration in India gives immense potential for the digital premium market. Globally, India had one of the highest insurance 'protection gap' as of 2014 as well as amongst the lowest insurance density (in 2018) in both the life and non-life sectors - at $54 and $18, respectively while the world average is $370 and $312, respectively.
While life insurance penetration in India at 2.7 per cent of GDP (as of 2018) is lower than global average (3.3 per cent of GDP), it's better than that of China and Brazil. However, penetration is particularly low in the non-life insurance segment which stands at 1 per cent whereas the world average is 2.8 per cent of GDP.
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