Even as the general business sentiment remains subdued in the continuing economic downturn the insurance industry is looking forward to good times with a predicted annual growth rate of premium earning growing at 20 per cent annually over the next five to six years.

The industry is expected to gross Rs1 trillion by 2015 according to an industry report released on Sunday.

A study jointly carried out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and the United India Insurance Co, has concluded that the massive increase in premium earning from Rs.280 billion could be attributed to increased awareness of the general public about insurance.

According to the study, the earnings from premium continued to grow at a compounded annual growth rate (CAGR) of 16.6 per cent between 2000-01 and 2007-08. In 2000-01, the gross premium stood at Rs96.2 billion and stood at Rs281.38 billionin 2007-08, the study said.

"The huge market largely remains untapped in both rural and urban India as 70 percent of the population is still not touched by insurance companies," said ASSOCHAM president Sajjan Jindal while releasing the findings.

"High growth in healthcare sector will also open up health insurance potentials substantially," he added.

However, the study says the Indian general insurance sector at Rs31,000 crore is still puny as compared with US, Rs2.44 trillion or France, Rs 3.7 trillion, Germany, Rs3.85 trillion or even China, Rs1.32 trillion.

In terms of penetration general insurance in India is 0.60 per cent of GDP against the world average of 2.14 per cent. The nation wise figures are US 3.94 per cent of GDP.

The figures for other nations are- Switzerland 2.4 per cent, France 2.34 per cent.

Germany1.99 per cent, Japan 1.46 per cent, Brazil1.10 per cent, Russia1.10 per cent, Thailand 1.08 per cent and China 0.81 per cent.

Analysts point to the great potential of India for general insurance because of the rural sector in which a large number of micro financing institutions have become active of late. This will lead to wider coverage for general insurance. In addition government initiatives on mass insurance will also grow to extend to larger parts of the country including semi-urban and rural pockets.

The paper suggests development of innovative low cost distribution and servicing strategies. In future the CAGR growth of general insurance will accelerate to over 20 per cent according to the study.

According to Jindal, insurance policies in future will be more focused towards simple and less legalistic policies with reasonable pricing and hassle free insurance policies. He added that the industry would acquire a professional approach and outlook making for more popularity and accessibility at the same time increasing affordability. ( See: Life insurance industry records 16-per cent in first three quarters of FY09 )