Insurance Sector in India poised for tremendous expansion
Insurance Sector in India is poised for tremendous expansion said Shri Pawan Kumar Bansal, the Minister of State for Finance while addressing a meeting of Insurance Australia Group on 21st September 2007 in Sydney. Shri Bansal said the banks also have entered the insurance sector in the form of corporate agencies or under referral arrangements to utilize the extensive and broad reach for marketing of insurance products.
IRDA has also notified Micro Insurance regulations facilitating insurers to tap the potential of rural markets. As per these regulations like Non-Government Organizations (NGO), Micro Finance Institutions (MFI) and Self Help Groups (SHG) have been recognized as micro insurance agents. It is envisaged that micro insurance would facilitate penetration of insurance to rural and remote areas. He said that Micro Insurance being an integral part of overall insurance system, attempts to offer the target specific insurance products at a relatively lower cost, for a lower coverage of amount.
Foreign equity upto 26% is allowed in the insurance sector. The entry of foreign partners has resulted in the sector attracting FDI of US 543 million as on 31 st March, 2007. The private companies have created a niche for themselves. They have been able to increase their share in the insurance market in competition with their counterparts in the public sector. As a part of the reform process, premium rates for non-life insurance products have been de-tariffed w.e.f. 1.1.2007.
Shri Bansal said that in insurance sector though the growth in recent years has been significant, India is far behind the world averages and ranks 78th in terms of insurance density and 54 th in terms of insurance penetration. The world averages are US $ 469.6 in terms of insurance density and 8.06% in terms of insurance penetration. Against this, insurance density was US$ 19.70 and insurance penetration was 3.17% in India for the year 2003. However, these two indices have increased following the opening of this sector.
Insurance Regulatory and Development Authority has granted registration to 37 insurance companies, which include 17 life insurance (including on PSU), 19 non-life insurance (including four PSU, one AICL & one ECGC) companies and one re-insurance company. At present seventeen insurance companies are operating in the general insurance side and seventeen insurance companies on the life side.
According to Shri Bansal, India offers a stable investment climate as well as a huge market with a growing middle class. Investor confidence in India is at an all time high today. A.T. Kearney in 'The FDI Confidence Index 2005' has ranked India as the 2nd most attractive investment destination just behind China whereas 'World Investment Report, 2005' ranked India as the 2nd most attractive investment destination among Transnational Corporations, he added.
FDI is now permitted in 21 activities through the auto-route. These include FDI in development of township, housing, built-up infrastructure and construction development projects, exploration and mining of diamonds and precious stones and insurance.
IRDA Guidelines for opening of representative/ liaison offices overseas by an Indian insurance company... Click here
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