Focus on Future Growth: India’s Changing Life Insurance Landscape

May 2023

With its fast-growing economy and rapidly expanding skilled workforce, it’s no surprise that India’s life insurance market is also poised for growth. Life insurance premiums are projected to increase 9 percent per year through 2032, making India the fifth largest life insurance market in the world.

It’s an exciting time for the Indian insurance industry. LIMRA and LOMA recently hosted an executive roundtable event in Mumbai to explore the unique and compelling factors that shape the sizeable market opportunity, the challenges that come with it and how LIMRA and LOMA can help the industry navigate uncharted waters. The event was attended by more than 50 senior executives from across the Indian insurance industry.

An Evolving Competitive Landscape

From 1956 through 1999, life insurance in India was nationalized, with coverage provided through the Life Insurance Corporation of India (LIC). In 2000, the country opened up its life insurance market to private insurers. Today, there are 24 life insurers operating in India, including the LIC. Most of the companies are joint ventures with global, multinational carriers.

Twenty-three years after the market was liberalized, LIC holds about 64 percent market share in the country’s life insurance sector. However, despite the increased competition, the overall life insurance penetration rate has continued to hover around 3.5 percent since 2000.

Looking ahead, India’s Insurance Regulatory and Development Authority (IRDA), which was established in 2000 to regulate the industry and promote increased competition and choice, has aggressive goals for increasing life insurance penetration rates, especially in rural areas. By 2027, the IRDA is seeking to double the country’s life insurance penetration rate through a combination of market awareness efforts, increased accessibility to coverage and added regulatory flexibility for insurers.

Prioritizing the Professionalization of the Industry’s Workforce

One of the biggest challenges to increasing market penetration is the high turnover rate among the industry’s agency workforce. To overcome the hurdles of reaching and educating India’s growing population about the need for life insurance and the financial protection it offers, agents need more in-depth training.

Repositioning life insurance sales as a career, rather than a short-term job or side gig, is a priority for carriers. Too often, agents leave the job after only a few months, which, in turn, creates poor customer experiences and increases policy attrition rates.

The good news is that India has a vibrant and growing professional white-collar workforce, but that can also create recruiting and retention challenges for insurance companies. In response, carriers are focusing on targeted recruiting strategies, followed by onboarding and ongoing training. Specialized sales training programs will also be vital for increasing market penetration.

LIMRA and LOMA are supporting India’s insurance carriers, as well as the country’s significant insurance-related business process outsourcing (BPO) providers, with comprehensive industry training and education options. The “hire-to-retire” programs for agents cover everything from basic product education and insights to customer needs through agency development and leadership skills. For agents, LIMRA pairs these product and industry training and development resources with extensive sales training programs to help them build the skills to identify potential customers, develop long-term client relationships and navigate the rejection that is inevitably part of selling. For carriers and BPOs, LOMA education is the pinnacle of a global designation program that equips employees with the knowledge they need to contribute to the growth of the Indian insurance industry.

Taking a Digital-first Approach

As India’s population hits 1.4 billion and prepares to surpass China as the world’s most populous country, it’s important to understand that the population skews significantly younger. Roughly, 43 percent of India’s population is under 25 years old, and the median age is 28, compared to 38 in the U.S. and 39 in China.

It’s no coincidence that India is also a leading adapter of digital technology. Mobile phones are ubiquitous, and an aggressive expansion of internet access is in progress throughout the country’s rural areas. As a result, Deloitte is projecting 1 billion Indian smartphone users by 2026. To succeed, life insurance companies must take a digital-first approach to engage and train their agency workforce. Digital sales and marketing tools will also be required to enable agents to effectively connect with and engage consumers.

Optimizing Opportunities for Expanded Distribution

India’s growing population and increased consumer awareness of financial protection needs offer an enormous opportunity for life insurers. To achieve extended market reach, insurers are capitalizing on opportunities to expand distribution through banks. While Banca accounted for 55 percent of life insurance distribution in India in 2022, banks are still seen as an underleveraged channel. An easing of regulations is expected to accelerate policy sales through banks, especially in rural markets.

Again, the professionalization of the bank employees offering the product will be key to optimizing bank distribution. Many of the joint ventures behind the country’s life insurance companies also have bank distribution channels, enabling synergies as they implement enhanced industry education and sales training programs.

Another opportunity that insurance carriers are looking to optimize is India’s government-led awareness campaign emphasizing the value of saving for retirement. The heightened awareness opens doors for increased distribution and sales of annuities as part of retirement plans.

The life insurance market in India is poised for continued growth. As the market matures, LIMRA and LOMA stand ready to support that growth and to provide significant value in the training and education of the country’s workforce.