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More private insurers coming
Freny Patel in Mumbai |
November 25, 2004 10:57 IST
There has been a strong revival of interest by global insurance majors to set up life insurance venture in India. AXA, Mitsubishi and Samsung have sent feelers in the Indian market, and made enquiries with the regulator, the Insurance Regulatory and Development Authority.
"We expect a few more applications in life insurance as the market is seen to be expanding and players realise that they do not need to take on the state mammoth, the Life Insurance Insurance Corporation of India," C S Rao, chairman, Irda, said.
The life insurance industry has witnessed growth rates in excess of 65 per cent during the current fiscal. Life insurance premium in the first six months rose to Rs 8,425 crore as per Irda's figures.
The US-based Principal has also applied to the Irda for a licence to set up a life insurance entity in India. Samsung has obtained a licence from the regulator to set up a liaison office in Mumbai, as it hunts for a joint venture partner.
The Irda has not received any interest from reinsurance companies or global non-life players. Samsung Life Insurance is the largest insurer in South Korea, controlling almost one-third of the Korean market.
"Global players are not waiting for a hike in the FDI (foreign direct investment) to 49 per cent," said Rao.
The problem today stems on their ability to find good Indian partners having a strong marketing presence, said Rao, following interactions with some global majors.
Ability of Indian players to bring in capital is also another problem area, said Rao. A key hurdle many global players face here is the difficulty in finding an Indian entity that is willing to commit capital without expecting any returns for the next 7-8 years, which is seen as the break-even point.
Currently, global insurance companies can commence operations in the country only through joint ventures, where the foreign entity can hold a maximum of 26 per cent.
This means Indian partners have to shell out 74 per cent of the funds into an entity that has a strong appetite for capital.
The Union budget had proposed a hike in FDI to 49 per cent, but with the Left, a key ally of the Central government, opposing the move, FDI remains at current levels.