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Informist, Wednesday, Sept. 3, 2025

 

Please click here to read all liners published on this story

--Life Insurance Council Rao: Insurance awareness not a problem in India
--CONTEXT: Life Insurance Council Rao's comments in an interview
--Life Insurance Council Rao:Hope likely GST cut will boost insurance demand
--Life Insurance Council Rao: Insurance to do well despite tepid sentiment
--Life Insurance Council Rao: Aim for 12-15% annual growth in insurance pdts
--Life Insurance Council Rao: To spend INR 1.5 bln/yr on insurance awareness
--Life Insurance Council Rao: New products, digital selling to drive growth

 

By Avishek Rakshit

KOLKATA – Increasing digitisation and rollout of new products, tailored each for urban and rural consumers, are expected to drive growth in the country's life insurance business in the next few years, Kamlesh Rao, chairperson of the Insurance Awareness Committee at the Life Insurance Council, told Informist in an exclusive interview. This growth, expected at 12-15% every year depending on market conditions, will also be aided by the introduction of standard products like Bima Vistar, which is designed by the Insurance Regulatory and Development Authority of India to provide integrated life, health, personal accident, and property coverage under a single policy.

 

"And increasingly, there is a focus on planning for retirement, which is where annuity as a product segment comes in for life insurance companies," Rao said.

 

Rao said the Life Insurance Council had engaged market research and consultancy firm, Kantar, to get insights about the life insurance segment in India and found that the entire insurable population is aware of the need to have insurance. "We realised that awareness is not a problem. I mean, in fact, the awareness of life insurance products is better than even deposits in this country. But awareness converting into consideration for purchase is where we thought there were issues," he said.

 

While the Life Insurance Council has rolled out campaigns to convert this market awareness into purchases of insurance products, Rao is hopeful that reduction in goods and services tax rates, which are being discussed by the GST Council, will have a positive bearing on improving demand for protection products in the insurance segment and can boost market growth.

 

Despite the tepid consumer sentiment which is affecting sales of most consumer products like consumer goods, automotive, electronics goods, white goods, paints, and several others, the insurance industry is expected to register much better performance, he said. "Markets have not been buoyant, but we are increasingly seeing a space in the financial planning of people for insurance," Rao said.

 

The following are edited excerpts from the interview:

 

Q: How is the life insurance sector looking at the moment and what kind of growth are you envisaging for the insurance sector in the coming days?

 

A: At Life Insurance Council, we are very hopeful that this industry will keep growing at about 12-15% every year. If you look at the new business CAGR (compounded annual growth rate) over the last 5-6 years, it is roughly in the range of about 11.0-11.5%. We think that penetration levels are low. We have committed to spend about INR 1.5 billion every year for the next three years and we've just started the campaign.

 

We did an extensive research through Kantar and we think there's a great opportunity in the protection policy. We also think that primarily people are talking about buying insurance for their family, children, and increasingly, there is a focus on planning for retirement, which is where annuity as a product segment comes in.

 

Q: What is the potential for the industry to get people into the fold of life insurance that you see in the next three years and five years?

 

A: In terms of number of policies, India roughly has about 1.4 billion population. Everybody is not insurable. So, the number of people who are insurable will roughly be about 920-960 million. And the total number of policies in India across all forms of insurance is roughly about 360 milion. That's the size that we have right now.

 

And for the Insurance for All by 2047 vision, my sense is Indian population will be about closer to 1.6-1.7 billion and by that point of time, insurable population will get closer to 1.1 billion.

 

Q: From what you say, there is a huge headroom, nearly three times, to expand the number of people covered under insurance policies. What measures do you think are needed to realise it?

 

A: It will require a lot of things to come together. Awareness campaign is one such initiative. The regulator is working very closely to create products which can be standardised so that all companies can sell a standard product.

 

Bima Vistar is a product thought of by the regulator and hopefully it will see the light of day in the next few months. It is a standard product which has a combination of health and life and property together, and priced at a uniform price for all insurance companies to sell.

 

And then the other platform that the regulator put in place is something called Bima Sugam, which again is a platform where everything of all insurance companies will be available. Insurance companies and regulators will have to be at it on a continuous basis to be able to make sure we can get there.

 

Q: The year 2047 is a long way to go. In the near mid term, what is going to drive growth in the industry?

 

A: If you look at the top two or three things that will drive growth for life insurance companies, it is new products, digital selling process, and annuity policies.

 

The digital selling process has become more advanced than it was five years back and people's ability to buy products has become quicker and faster. And the new products that life insurance industry will get in will include annuity policies which is a very big investable class.

 

India's 60 plus contribution today is about 11% of the entire population. In the next 20 years, this number is going to become 23% of India's population. Annuity policies, which used to be about 2-3% of life insurance companies business has already started becoming about close to 9-10%.

 

So, as you keep creating new products for segments that are becoming bigger, over a period of time, automatically, growth for life insurance industry will happen.

 

Q: Can you throw some light on how different approaches are needed for urban and rural markets?

 

A: At the Life Insurance Council, we constantly keep discussing this. If you look at e-commerce today, rural markets are growing at a much faster pace than the urban markets. But differentiated paths are needed because the size of the coverage required in rural markets is smaller compared with urban markets.

 

A lot of companies from the industry are doing their bit through their bank partners and for the private industry, about 50% of the business comes from the bancassurance partners and because we have different categories of customers, a lot of insurance companies are creating different products that can cater to different customer categories for the banks in some fashion will help even rural penetration.

 

Also, standardised products, like Bima Vistar may create an opportunity for penetrating the rural market significantly.

 

Q: Can you elucidate more on the differentiated approach?

 

A: The average ticket size of protection insurance plans, which get sold in urban markets, is over INR 5 million whereas in rural markets, the need for such policies is between INR 1.0 million and 2.5 million. I think the need for creation of those kinds of products and protection policies will be important.

 

And also, products which can be paid on monthly modes are needed because that will drive penetration significantly more than lump-sum premiums.

 

Q: Consumer demand conditions have not been good for quite some time now. Given this backdrop, why do you think that people, when they are not spending on their grocery bills or other items, will want to spend a larger amount on insurance?

 

A: Because it's not about protection only, right? It's also about guaranteed interest rates that life insurance companies give to the people. And interest rates are only going down right now. But when you buy a guarantee, taking products from life insurance companies, then the rate remains guaranteed for the next 20, 30, 40 years. No other product offers you those kinds of offerings.

 

Q: Is that the reason why annuity policies are picking up in India?

 

A: Annuity policies used to be 2% of all life insurance companies' business about 2-3 years back. It has already become close to 10% right now. People are increasingly becoming aware that when they live between 60 years and 80 years, cost of medical inflation will be higher.

 

Inflation anyway in this country is roughly 4% on average, so they have to plan for their cash flows. Annuity policies give you income for whole life.

 

Q: Is there any particular income segment which is driving this growth in insurance industry despite muted consumer demand  conditions?

 

A: By and large, income levels of over INR 500,000 is what the insurance industry caters to. But typically, in the INR 750,000-INR 1.5 million segment is where we are seeing significantly higher growth levels.

 

Q: This year, are there any different trends which has been visible in the industry so far?

 

A: People are worried about where interest rates will go and have a view that interest rates may just keep going a little down. So, typically on long-term savings products, we are seeing an uptick where we offer guaranteed rates of interest. The other area is growth in annuity policies and ULIP policies are also picking up, if I am not wrong.

 

Typically, ULIP policies are around 20% of the business of the life insurance companies. If the markets do well, then that 20% will become 30% and if the markets are muted, then it will be 20-22%.

 

Q: Can you give us an idea on how protection policies are doing?

 

A: That has remained at about 7-8% of the business for the industry. Because post-COVID, what happened is the price of mortality went up in India and the price has gone up significantly. That has impacted sales and it went down to 5-6%. Now again, we are slowly inching back to about 7-8%.

 

Q: And which income segment is driving this rebound? The ultra-rich consumers?

 

A: The average value of protection in India is roughly about INR 8.0 million-INR 8.5 million. So typically, it caters to people in the income category of INR 1.0million-INR 1.5 million. It is not fuelled by ultra-rich. Rich and ultra-rich people normally think that if they have a reasonable amount of wealth that they have created, then they may not require such a protection policy.

 

Q: What is your view on the proposed GST reduction for life insurance policies? 

 

A: If GST comes down, will be applicable only in the protection business. Like I said, it is about 7-8% of the business for life insurance. If GST becomes lesser, obviously there will be some benefit to the customer. The price will be cheaper for sure. My sense is it will help the 7-8% get to say 10%; that much upside we will see for sure.

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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