LONDON--(BUSINESS WIRE)-- Further growth is anticipated for India’s insurance market, although achieving profitability continues to remain a struggle for many insurers, a new special report from A.M. Best Co. finds.
The report, "Growth Anticipated for Indian Insurers, But Frustrations Remain,” states continued economic growth, an expanding middle class and heightened demand for health insurance is resulting in foreign insurers and reinsurers seeking to establish a greater presence in the country. However, while the insurance sector offers the prospect for growth, it is also characterised by challenges and frustrations.
In the long term, India’s middle class is continuing to benefit from increased wealth, although a slowdown in the pace of gross domestic product growth and inflationary pressures could dampen the rate of insurance market growth. While the insurance market is expected to continue to grow, it has been characterised by intense competition.
Private insurers have also been frustrated by losses emanating from the motor pool and have called for its restructuring or abolishment for years. In December, the Insurance Regulatory and Development Authority unveiled plans to dismantle the pool in light of an alarming increase in its liabilities which severely affected the financial viability of the general insurance sector due to alarming capital depletion in the sector. The regulator said policyholders’ interests were also being eroded as there were huge inefficiencies in claim settlement. The impact of the change on the existing motor pool is unclear.
A.M. Best’s report also examines the ways that non-life insurers are attempting to improve underwriting performance and how the life sector is adjusting to regulations restructuring unit-linked insurance policies. Life insurers have experienced a sharp drop in first year premium, and companies are adjusting their product mix toward conventional offerings.
The report also identifies some of the main reasons why the Indian insurance market is attractive to overseas insurers and the difficulties they face in increasing their involvement.
Yvette Essen, report author and director of industry research – Europe & emerging markets, said: “International insurers and reinsurers continue to be attracted by the opportunities emerging in the world’s second most populated country. However, they face repeated frustrations in attempting to increase their involvement in India, with a lifting of the foreign direct investment limit from 26% to 49% unlikely to occur in the near term.”
To access this special report, please visit www.ambest.com/press/011601IndiaMarketReview.pdf.
For a video discussion with Yvette Essen, director of industry research – Europe & emerging markets, about the special report, please click here.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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