With the government increasing the FDI limit to 49%, there is a keen sense of anticipation within the Indian insurance industry that is expecting a flush of foreign investment in the sector. However, valuation of insurance companies is still a relative novelty for investment analysts in India as the industry has historically been isolated from the analysts’ radar.
A joint CII-Towers Watson study, titled Indian Insurance Sector: In Pursuit of Value demonstrates the measurement of value from insurance business and chronicles the industry's experience to date in being able to deliver stakeholder value for both the consumers and providers of insurance.
In addition, four fundamental drivers are identified that would help realise the value that this sector promises:
- Business Optimisation
- The right product-price proposition
- Favourable macroeconomic fundamentals
- Confidence building
The study also highlights the historical focus on short term KPIs by focusing disproportionately on just new business growth and premium incomes that may have hampered long term value creation for the sector that would emerge with a robust back-book. A key requirement for the implementation of business optimization strategies is ensuring alignment of the KPI of the senior management of insurance companies with shareholder objectives.
The report was released at the First Meeting of the CII National Committee on Insurance & Pensions 2015-16 held on 31 July, 2015 in Mumbai.