Came across this interesting argument against investing in Life Insurance sector by Sridhar from Enam.
" If I look at life insurance versus general insurance, their persistency ratio for 61 month is 50% which means half your customers are not paying your premiums after five years. You typically end up making money only after five years because of the way insurance is structured. Half of them are not paying.
The number two is that the penetration of life insurance adjusted for per capita keep in mind that these are actually financial products. You cannot say we are 2.5-3% penetration and China is also 3%. Their per capita is four times larger than us.
From a penetration standpoint also, this is one of the only product where India is over penetrated forex per capita. And my last point on life insurance is that there are roughly 300 million life insurance policies outstanding in the market as we speak, the total number of households are roughly 300 million and if you assume only half of them are insurable you are already talking of of two life insurance policies per household. Whichever way I cut it, it looks over penetrated to me."