With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market is estimated at Rs. 450 billion (US$10 billion). According to government sources, the insurance and banking services’ contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part. The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector. The year 1999 saw a revolution in the Indian insurance sector,ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Though, the existing rule says that a foreign partner can hold 26% equity in an insurance company, a proposal to increase this limit to 49% is pending with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 21 private companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium income from new business at Rs. 253.43 billion, braving stiff competition from private insurers. LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in. But this was still not enough to arrest the fall in its market share, as private players grew by 129% to mop up Rs. 55.57 billion. Though the total volume of LIC's business increased, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent.
The rate at which the private share has increased, it clearly shows the potential of this sector. In the globalize market scenario India has big role to play.People in India are brand conscious and show loyalty to a brand if they believe in it or have known it for quite a long time is one of the features of Indian market which needs to be understood.