Well, I don’t know if it should be called a party. But while there have been talks of a few exits (or shall we say strategic re-alignment) in the life insurance space, we have seen three new entrants in the general insurance space in the last few months.
We had Religare Health Insurance Company being formed a few months ago and just two days back, we had Magma HDI and Liberty Videocon general insurance companies getting their approval from IRDA.
That takes the count of general insurance companies in India to 27. Some developed countries have a much larger count of health insurance providers. If service levels can be ensured, the more the merrier it is for the consumer — more players, more competition, more innovation and hopefully better services would be offered as differentiators.
India is a big country with an extremely large spectrum of customer profiles and there is enough scope for differentiation to be created with niche products and services and maybe even on pricing. Clearly, some of the existing players have already started distancing themselves from the price-war-for-market-share game.
While the profitability of general insurance companies may not look all that attractive currently with most making mostly investment income, they definitely seem to be growing. The general insurance industry grew at a healthy 23 percent in the last year compared to the previous year. With increasing healthcare costs and awareness regarding the same, more and more of the population would start buying health insurance plans. We currently have only four (including the latest entrant Religare) specialist health insurance providers — we may see a few more wanting to tap this large market.
Even on the motor insurance side, better tracking and hence refinement would come in. This would result in much better risk-based pricing of motor insurance plans. Indicators suggest that motor insurance premiums too would rise, which again makes the market bigger and may increase the price-sensitivity as it is a relatively standard product offering. Market share too is split between a larger number of players, unlike the life insurance space where LIC has very dominant market share of 70 pct + of the annual market.
All this bodes very well for the general insurance industry even in the medium term. Greater competition will almost always create better products for the consumer. So cheers to this.