Life insurance products play an important role in both the developed and developing countries in channelizing savings into investment, either because of strict regulations put forward or for the expectation of higher returns from the securities, and other financial markets. In the modern era, high returns obtainable on longterm assets and the saving component stimulated by fiscal incentives, has become the most favourable argument for the growth of life insurance business. The quantum growth of insurance business in the postliberalization era motivates this paper to incorporate some of the important economic implications of growing life insurance business, often overlooked in a general discussion of savings. This paper makes a crosscountry comparative analysis of insurance density, insurance penetration and life insurance premium of selected countries to understand the development and importance of the life insurance market. The study concludes that there is a steady growth of life insurance business in India but the selected developed countries have a higher percentage of life insurance premiums in the gross domestic savings. The importance of premium figures often gives a wrong picture of the insurance business as compared to `insurance reserves'. The difference between premium and insurance reserve is presented along with the factors that affect the growth of insurance reserves. Taking two emerging economies in terms of prospective insurance business and comparing premium, reserves, GDS, penetration and density figures with a developed economy, we obtain striking results. Given the population projections along with the liberalization of markets in the selected emerging economies, the potential for insurance growth lies more in these economies compared to the selected developed country.
Life insurance products play an important role in both the developed and developing countries
in order to channelize savings into investment, either because of strict regulations put forward
or for expectation of higher returns from securities markets and other financial markets. In the
modern era, high returns obtainable on long-term assets and the saving component stimulated
by fiscal incentives has become the most favorable argument for growth of life insurance
business. The voluminous growth of insurance business in the post-liberalization era across the globe motivates this paper to incorporate some of the important economic implications of
growing life insurance businesses, often overlooked in a general discussion of savings.
Comparative analysis of insurance density, insurance penetration and contribution of
households to savings through life insurance premiums with selected countries is undertaken
to understand the comparative development and importance of Indian life insurance market
(refer Annexure). The study concludes that there is a steady growth of life insurance business
in India. |
