Foreign Insurers Set to Invest Heavily in a Cash-Starved India Market
India’s latest move to liberalize its insurance sector may create
the long-hoped-for opening for foreign insurance companies to advance
into the under-developed market. But while business is thriving,
foreign insurers must face reality checks in the form of the country’s
limited capacity for infrastructure and system supports, competition
from public insurers, operating expenses and investment costs.
The Indian Parliament’s raising of direct foreign investment limits
in insurance ventures from 26% to 49%, if enacted in December, will
mark a milestone in India’s insurance industry since the opening of the
sector for private and foreign investors in 1999. Since then, insurance
sector has been expanding by an average of 25% per year, according to
PricewaterhouseCoopers in a recent report.
Underlying factors for liberalization are being driven by
fundamental developments in the country’s insurance market, in which
foreign capital injection and knowledge are important to fuel the
growth of distribution and product promotion.
Prior to the partial opening of the market, the insurance sector was
controlled by a handful of state-owned enterprises. In the absence of
competition, product choice was largely limited to endowment and
money-back life policies and fire and property policies, according to
PricewaterhouseCoopers.
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