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The insurance industry certainly seems to be the cynosure of India Inc. In fact, the industry, which posted a whopping growth to the tune of 45% (life insurance) and 16% (non-life insurance) for FY 2009, is all set to see the entry of new players. Be it Bank of Baroda, Larsen & Tourbo (L&T), Edelweiss or State Bank of India; the renewed interest in the sector certainly signals a positive future for it. While L&T plans to foray into the general insurance business by 2010, Bank of Baroda is expected to commence its life insurance business in the next seven months. Even SBI is expected to start its general insurance business by the end of this fiscal year. Moreover, what is interesting to note is the fact that while there is no clear indication of reforms flowing in from the government, the capital intensive business is attracting the interest of major groups. Perhaps, the low penetration (4% for life insurance and 0.6% for general insurance) and the regulator IRDA’s recent initiative is guiding their decisions. Agrees Debashis Sarkar, Sr. Director & Chief Marketing Officer, Max New York Life Insurance, “The exclusion of mortality and morbidity charges from the cap will ensure that there is no compromise on growth in sales of valuable life cover. This is of critical importance in a country like India where 96% of the households are vulnerable. In addition, the life insurers will not have to resort to cross subsidisation across age groups to meet charge cap. The decision clearly indicates that IRDA wants life insurance to be viewed as a long-term protection product.” This clear cut long term objective from the regulator has further given a boost, not only to the domestic players, but also to the international players. Moreover, despite the current hurdles, it’s certain that the FDI norm will be eased for the sector (sooner or later), a reason why many more are mulling over the insurance business!

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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