Life Insurance: One sector, diverse fortunes
Subscribe to enjoy similar stories. India’s insurance sector is the tenth largest in the world, and is expected to reach $170 billion by 2027. Driven by the increased sensitization to the importance of insurance and the digitization push, the sector has grown by leaps and bounds since the pandemic.
Still, only 18% of India’s insurable population is covered by insurance, leaving ample scope for the sector’s growth. In 2000, the government opened up the industry to private players. And the rules of the game have been changing frequently in the constantly evolving regulatory landscape since then.
The largest players in the Indian life insurance sector today include LIC, SBI Life, HDFC Life, ICICI Prudential Life, and Max Financial Services. Despite belonging to the same industry, catering to largely the same customer base, and being governed by more or less the same set of rules and regulations, these stocks have delivered diverse investment outcomes. On one extreme, LIC has eroded about 30% of investor wealth over the last one year.
On the other extreme, we have ICICI Prudential Life, which has appreciated by about 12% during the period. In this article, we shall delve into the factors driving this divergence. Be it disincentivizing insurance policies via tax changes which has reduced the scope for insurers' revenue growth, reducing the surrender penalties, which has affected their margins, nudging private insurers to get listed, or the latest move to allow 100% FDI in insurance that is likely to bring in additional $12 billion of foreign capital, changing regulations have forced India’s insurers to frequently recalibrate their business models.
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