India bucks Asian market trend with higher valuations for life insurance companies: McKinsey

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According to a McKinsey report, the Indian life insurance sector has been a bright spot in the Asian region as life insurers in the country have received higher valuations compared to other countries like China, Japan and Taiwan.

The decline in valuations of life insurers in the region between 2012 and 2022 coincides with global insurers, mainly due to slow growth and declining populations in markets such as Japan and Taiwan. The decline in China’s growth rate also negatively impacted valuations.

But positive growth momentum and strong underlying factors have supported high valuations in the Indian market.

The countries of Southeast Asia are somewhere in the middle: Growth, which had stalled during the pandemic, is slowly coming back, with each country recovering at different speeds. This reflects a challenging environment for life insurers in a region where market sentiment and investor sentiment are closely linked to economic, technological and regulatory dynamics.

Domestic and international insurance companies continue to compete for market share in developed and emerging markets. Over the past five years, large multinationals in Asia have shown steady growth, steadily gaining market share from smaller multinationals and domestic insurers.

This trend is particularly evident in emerging markets such as Malaysia and Thailand, where multinationals dominate in terms of market share.

China and India are outliers, dominated by domestic players such as Ping An Life and Life Insurance Corporation of India (LIC), respectively. But leaders in these countries are losing share to foreign insurers and other domestic and joint venture insurers.

distribution agency

Many insurance markets in Asia that are still emerging, such as India, China and Indonesia, have a large tied-agency power, which has been the main means of reaching large populations spread across dispersed and large countries.

However, insurers are facing challenges in engaging their tied-agency workforce. According to estimates, between 60 and 80 percent of agents leave the system within the first four years after recruitment. The agency channel in Asia is set to grow significantly. Insurers can prepare for that future by defining the target segment they want to serve and organizing their distribution channels around the optimal approach to serving their customers.

Asia is the leader in insurance distribution through banks, accounting for about 48 percent of bancassurance premiums globally. In markets such as India, Hong Kong, Indonesia and Taiwan, more than half of premiums come from this channel. However, most insurers and banks have not yet reached this level of bancassurance success.

According to ICICI Prudential Life Insurance Company, the country’s leading private life-insurance company, the bancassurance sector accounts for 55 per cent of individual business premiums in the private sector in India.

Banks in India are rapidly adopting itThe open architecture in which they can partner with nine life insurance companies, nine non-life insurance companies and nine standalone health insurers will further increase competition.

This enables them to offer their customers a range of insurance options from multiple providers. As a result, insurers are being forced to innovate and offer attractive products. “This benefits consumers, who have more options to choose from, and can tailor their insurance coverage to their specific needs,” it explained.

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