MUMBAI: Indian insurers have fared poorly in productivity despite growth in volumes, with commissions, operating and marketing expenses rising sharply, according to a report by McKinsey. According to the report Indian companies are doing much worse than MNCs in Asia in terms of productivity.
The report said that listed life companies have been unable to generate sufficient returns to cover their cost of equity in the past two to three years.
“This raises questions about the long-term viability of their business model. The three largest listed private life insurers had return on equity (ROE) minus cost of equity (COE) ranging between – 3.9% and 1.6%. Although value-of-new-business (VNB) margins for these players improved during this period from about 17% to over 25%, they are relatively low compared with MNC players in the Asian market, which boast VNB margins exceeding 50%,” the report said.
