Health insurers poised for high growth, fierce competition in India

India - Major ContributorsIndia’s insurance industry is set to grow faster than its economy till 2020, according to a recent post at Globalsurance, with total premium income to hit anywhere from 350 to 400 billion US dollars. This would be an increase of more than five fold in just under 10 years¬† (the Indian insurance sector currently consists of 23 life and 24 non-life insurance firms, valued at a cumulative total of around USD 66 billion).

A recent study by the Federation of Indian Chambers of Commerce & Industry (FICCI) and the Boston Consulting Group found insurance premiums as a percentage of overall GDP rose from 2.3 to 5.2% over from 2001-2011.

Growth potential isn’t limited to domestic firms, however. A bill to bump the current cap on foreign direct investment in the private insurance industry from 26 to 49% is currently making its way through the Indian Parliament. This bodes well for foreign health insurance firms and joint ventures currently operating in India, a list that includes Apollo Munich Health Insurance and MaxBupa Health Insurance. Health insurance is one of the fastest-growing sectors of India’s insurance market, accounting for 20.8% of the overall market in 2010.

Nonetheless, the industry is likely to experience further growing pains as government controls are gradually relaxed. De-tariffing in particular has pressured health insurers’ profit margins in recent years.

As with many industries in emerging markets, India’s health insurance market offers the potential that comes with favorable demographics alongside the challenge of fierce competition. That means plenty of opportunity for international health insurers – provided they can stand the heat.