Do State Owned Insurance Companies Still Dominate The Market?

Do State Owned Insurance Companies Still Dominate The Market?

There’s an interesting story in The Economic Times today. The story relies on latest data released by the Insurance Regulatory & Development Authority of India and states that public sector or state owned insurance companies continue to have a stranglehold over the life insurance market. According to the news story, LIC completely dominates the field with an overwhelming market share of more than 62% in the life insurance market. The company with the second largest market share is SBI Life, another state owned firm. Ever since private insurance companies were allowed to operate in the Indian market in 2000, many analysts have expressed concerns that state owned companies will steadily lose market share as consumers shift to private players who would be more “pro-active and efficient”.  This actually happened in the telecom and aviation sectors after private players were allowed to operate. Once a monopoly, the state owned BSNL is a pale shadow of itself and is now being bailed out yet again by the government with a Rs 1.5 lakh crore package. Air India has been sold off to the Tata group that was the original founder and promotor of the airline.

The first chart shows that state owned insurance companies have weathered the storm and not allowed the private sector players to elbow them out of the market. As mentioned earlier, LIC leads the field with a market share of 62.3% and SBI Life comes a distant second with 7.01% in July 2022. The chart shows figures for the three leading private sector players who come way behind market leader LIC. HDFC Life boasts of a market share of 6.01%, followed by ICICI Prudential and Bajaj Alliance with 4.01% and 3.38% respectively. The private sector players have invested heavily and aggressively in marketing and advertising to lure potential customers away from LIC. If LIC still controls more than 62% of the market more than 20 years after private players entered the market, it indeed a creditable achievement. According to the IRDA data not shown in the chart, all the private players together accounted for just about 31% of the market share. Compared to what happened in the telecom and aviation sectors, this comes as good news for proponents of public sector companies.

Yet, a deeper dive not the data released by IRDA reveals that the story by The Economic Times is correct, but doesn’t present the entire picture. The newspaper talks about premium collections while referring to market share. There is another metric that has been released by the IRDA which provides an altogether different picture. The market share based on this metric refers to the total sum assured. If one goes by this July 2022 metric, the overwhelming market dominance of LIC disappears completely. According to this metric, the market share of LIC is a shade below 19% while ICICI Prudential is not far behind with a market share of almost 16%. Even the other two big private players have a bigger market share than SBI Life.