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How India’s demographics are helping the insurance industry grow

Dec 12, 2019 | 4 months ago | Read Time: 3 minutes | By iKnowledge Team
How India's Demographics are Helping the Insurance Industry Grow

India is one of the leading insurance markets in the world, expected to grow from $85 billion in 2017 to a whopping $280 billion in 2020. [1]This remarkable growth of the Indian insurance industry can be traced down to a range of factors, including the increase in foreign investment in the industry, reduced roadblocks in the sector, digital advances, rising customer awareness about life insurance plans and products, but perhaps one of the most important factors that helps tie in all these growth drivers is the demography of the country. A range of demographic factors including the rise of a middle-class population, young insurance population as well as the growing awareness about protection are helping drive the growth of the Indian insurance industry.

Growing middle-class population

A study[2] published by the McKinsey Global Institute highlights the rate at which the Indian middle class is growing. According to data provided by the study, in the next two decades, the middle-class will move from being 5% of the population to more than 40%, making India as the fifth-largest consumer market in the world. Additionally, the report also highlights that due to this shift, there will be a huge change in the spending patterns of consumers as they will be more likely to make discretionary purchases, which are expected to comprise a majority of consumer spending.

What is even more noteworthy is that market experts predict the growth of the middle class will be spread out across urban and rural areas. Extremely rural levels of poverty have already declined from 94% in 1985 to 61% in 2005 and are further projected to drop to 26% by 2025. While the common perception tends to border around the fact that growth is usually limited to urban areas, this seems to be changing.  The report also goes to talk further about the spending patterns of this growing middle class, highlighting that more and more spending will shift from the informal economy, into formal economy of organized businesses. This is clearly indicative that products such as life insurance plans will be highly demanded in the future.

 The growth of the middle-class demographic means a wider target market for insurers as they are the ideal customers. Coupled with the rise in popularity of term plans, which with their low rates of premium and high coverage are the ideal products for middle-class customers seeking to buy a life insurance policy are driving up the insurance industry in India.

Rising awareness of the young population                                          

Another very important demographic factor pushing the growth of the insurance industry is the rising awareness among the youth about financial protection and insurance products. A study conducted by the International Journal of Commerce and Management Research to study about consumer buying behavior towards life insurance found that people below the age of 30 and between the ages of 31-40 prefer to invest in life insurance policies, and also have the income potential to do so. [3] As per a study[4] conducted by consulting firm Ernst and Young, more and more young people are buying insurance policies online, and with the digitalization of the insurance industry, they are opting to read about products online, talking about them with friends or family on social media, and then buy them through mobile apps or on websites. The combination of these two demographic factors: a growing middle class and a growing generational awareness about the importance of insurance is catapulting the other factors which are responsible for the growth of the Indian insurance sector, which is expected to grow by over 12-15% in the next five years. To know about Aegon Life Insurance products like term insurance and other products, visit our home page.               

Citations:

[1] https://www.ibef.org/download/Insurance-Report-Feb-2018.pdf

[2] https://www.ecell.in/eureka13/resources/tracking%20the%20growth%20of%20indian%20middle%20class.pdf

[3] http://www.managejournal.com/download/532/3-6-54-365.pdf

[4]https://www.ey.com/Publication/vwLUAssets/ey-digital-transformation-in-insurance/$FILE/ey-digital-transformation-in-insurance.pdf

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