Even after implementing a host of reform measures, the Indian insurance sector has a long way to go in order to be comparable to other advanced economies, a study conducted by Indian Council for Research on International Economic Relations (Icrier) has revealed.

Highlighting that low insurance penetration, especially in the rural India remains a key challenge, the study noted that life insurers — especially the private companies — have been gravitating towards the urban markets to the detriment of the rural population.

However overall, the study stressed that India’s insurance sector – both life and non-life have the potential to grow further due to the underpenetrated nature of the market. Besides, demographic factors and increased awareness will also push growth in the sector.

The dominant position of state-owned insurers is also proving to be a cause for concern for private sector insurance companies as well as foreign firms. That apart, insurers in India lack sufficient capital, and their financial health, particularly that of the public sector insurers, is in a precarious state.

The study also noted that concerns in the non-life insurance sector regarding product pricing and overcrowding in some segments remain and need to be addressed.

Besides, challenges relating to traditional distribution channels also have hindered growth in the sector.

In India the life segment dominates the overall insurance umbrella with a huge share of 74.7 per cent, while non-life accounts for 25.3 per cent.

The study also said that the industry has undergone several changes in the last few years. One of the most important decisions was the opening up of the sector to foreign investment. While the Narendra Modi government had earlier increased foreign investment cap to 49 per cent from 26 per cent, a recent notification of 100 per cent foreign direct investment for insurance intermediaries has further liberalised the sector. “The sector has transitioned from being an exclusive state monopoly to a competitive market, but public sector insurers continue to have the upper hand in the market,” the study said..