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Gradually the macroeconomic environment has significantly improved all over the world with rising GDP in most of the countries and increasing middle class and high net worth population with more and more financial resources. These factors have led to the growth of life and non-life insurance companies with more number of companies entering the insurance sector and the existing companies expanding their business and earning more profits. The non-life insurance segment has followed a non-declining growth trend, capturing a significant share of the insurance industry, which is reported to be 32% of its insurance industry’s gross written premium? While the penetration and density ratio are higher than in about one third of OECD countries, the penetration ratio has followed a downward trend since 1998, both in life and non-life insurance with the penetration ratio of non-life segment always above the life insurance segment of the industry.

Mapping the Non-life Insurance Industry

The key categories under the non-life insurance industry includes: motor, property, liability, marine, aviation and transit insurance, where property and motor insurance dominates the non-life insurance industry the property insurance category’s gross written premium posted a review-period growth in the segment’s gross written premium, and motor insurance was the largest category in the non-life segment.

The unique feature of non-life insurance industry is its low level of competition due to concentrated market structure as against the rising competition trend all over the world. The non-life segment is highly concentrated, with the 10 leading companies accounting for most of the segment’s gross written premium. This has emerged as one of the major challenge to the insurance industry. The Return on Equities has declined on account of financial crisis and several internal factors like introduction of more stringent capital requirements. However several opportunities do exist as far as the macroeconomic trend and industry friendly, impact of natural calamities and expansionary reform are considered.

In the next few years, the non-life insurance industry is expected to show positive growth with the motor insurance and property insurance dominating the industry as always. But with a different trend of property insurance category capturing more share of the non-life insurance industry’s GWP in coming years. Motor insurance category and property insurance category is expected to grow. Domination by the motor insurance category is obvious on account of the compulsory sub category motor third-party liability insurance. Within the motor insurance category, the motor hull sub category accounts for 58% and motor third-party liability insurance accounts for 42%. Also, considering the recent reform taken up by the govt. in the insurance industry, higher level of competition in the market with the entrance of more no. of companies in the industry, is expected. Also, due to increased capital and with the wave of adoption of advance technology all over the world, more efficient market conditions are anticipated.

Key Macroeconomic Trends Driving Growth in Non-life Insurance Industry

The financial crisis of 2007-08 had adversely affected the non-life insurance industry. However, with the improvement in GDP and other macroeconomic variables, the growth in the insurance industry gained momentum and showed stable and steady non-declining growth rates as per some key performance indicators such as written premium, incurred loss, loss ratio, commissions and expenses, combined ratio, total assets, total investment income and retentions. The trend is expected to be continuing in the coming years as well.

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