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Reasons Why Life Insurance is Great Sector to Invest In

October 01, 2018 1957

Apart from Fast-Moving Consumer Goods (FMCG), consumption and banking sectors for sustained returns, investors have the Insurance sector to look at as a great investment space. The First Initial Public Offering (IPO) of a pure life insurance company, ICICI Pru came in September 2016. This was followed by the SBI Life IPO, which came in September 2017 and then HDFC Life in November 2017.

Listed below are a few reasons why Life Insurance is considered a good investment option:

Low Penetration
The ratio of premium to Gross Domestic Product (GDP) in India is only 2.7 percent compared to a world median of 3.5 percent, or Thailand’s 4 percent or South Africa’s 11 percent. This makes Life insurance an exciting high growth sector.
Underinsurance
We not only have the issue of lower penetration, but also under-insurance. People who are aware and have taken an insurance policy are grossly underinsured. Both these factors mean faster growth opportunities.
Fastest growing economy
Our population is only growing at about 1.2 percent. This means, the per capita income will grow at a much more rapid pace. This leaves space for fast growth.
Foreign Institutional Investors and pension funds like them
Long-term institutional investors like pension funds and other FIIs love the life insurance sector for the visibility it offers. And knowing the growth possibilities in the sector, they are likely to hold these stocks for a really long term.
The long term capital gain gifts
This year’s budget exempted the investments through Unit Linked Insurance Plan (ULIPs) from the Long Term Capital Gains (LTCG) tax. While direct equity and mutual fund units will bear the LTCG impact, the ULIPs will be exempted. This gives the ULIPs a tax differential, which will make them a preferred vehicle of equity investments. As more money flows into ULIPs the Assets under management (AUMs) of these insurance companies will rise, enabling them to improve their returns to their shareholders.
High Growth
New business in life insurance premium has increased at a Compound Annual Growth Rate (CAGR) of 24.3 percent for 2015-17. Life insurance companies enjoy a lower corporate income tax rate of 14.3 percent.

Life Insurance is the best sector to make an investment in the present. HDFC LIFE offers various plans to help you plan your investment.

https://www.hdfclife.com/

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Francis Rodrigues

Written By:

Vishal Subharwal

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