What entices insurers to India?

By R.N.Bhaskar

November 23, 2006 (published in the DNA).

On the face of it, it is China that should be more seductive, with a promise of a lot more. . . . . But the queues are longer at India’s doorstep.

The joker in the pack could be the Indian government’s policy to introduce detariffing with effect from January 1, 2007.  Contrary to the past 50 years that were witness to government-owned insurance companies dictating a uniform rate that insurers would have to pay, detariffing will allow more competition in the market.  No longer will all insurance companies offer the same rates and the same terms. 

At the heart of the situation, notwithstanding the lower cap of 26% on the foreign equity share capital holding in joint-ventures in this country, is the Indian demographic promise.  Thanks to a robust population growth – once much maligned – India’s working population today accounts for 58.2% of its population. 

On the face of it, it is China that should be more seductive, with a promise of a lot more.  Not surprisingly, insurers, when they look at the numbers, are initially compelled to make a beeline to China.  After all, it has already proved to be a larger market, has more global players, a higher industry growth and more FDI leeway in the insurance sector (please see table 1).

Table 1:What entices insurance companies?

But the queues are longer at India’s doorstep. And this can be explained by a recent study by Gary Bennett, managing director & CEO, Max New York Life Insurance, and similar studies by Morgan Stanley and HSBC.  These studies show why almost everybody believes that India could be where the market could be far more exciting  (please refer to Table 2).

Table 2 . . .