In March 2015, the government passed the long-pending insurance bill which allowed, amongst several other things, the foreign JV partner to hold a stake of upto 49% in the insurance company. "This has not only enthused the existing partners but also made the industry more attractive for players who were earlier unwilling to enter the Indian market solely due to caps on maximum stakes. Several insurance players to witness rise in foreign shareholding over the near to medium term," said ICRA.

Though the product profile has undergone a gradual shift towards non-linked products (owing to the large number of regulatory changes introduced in September 2010) in the last few years, the growth of this segment has slowed considerably during FY2014. However, during FY2015, due to the improving sentiments in the domestic equity markets, linked products have begun to make a comeback. "Going forward, the strength of resurgence of linked plans will largely be a function of the extent of improvement in equity market sentiments," ICRA said.

ICRA expects domestic life insurance companies continue to remain well capitalized with the median solvency indicators for 'Select Private Players' standing at 3.35 as on March 2015 as against a regulatory minimum of 1.5 times.

In line with ICRA's expectations, persistency ratios across buckets (13th, 25th and 37th month) have improved for 'Select Private Players'. When compared against Mar-14 figures, persistency figures across buckets have improved from 67%, 63% and 50% to 73%, 66% and 59% (13th, 25th and 37th month).

"This is mainly because of the impact of the September 2010 guidelines that mandated raising the lock-in period to 5 years that caused incremental policy issuances to comply with the new rules," ICRA said.

For LIC, persistency ratios have declined considerably during the year since LIC phased out a large number of its products that did not comply with the fresh set of product guidelines issued by the IRDAI, it added.