Pvt insurance cos still months away

Pvt insurance cos still months away
EEB & AGENCIES

Mumbai, December 8: It could take a year for foreign insurers to start operations in India despite this week's opening up of the sector by the country's Parliament. A host of foreign insurers have already secured local partners, but they will now have to obtain licences from the Insurance Regulatory Authority, which could take months.

"The most optimistic date is October 2000 and the most realistic is the first quarter of 2001," said Dalip Verma, chief executive of AIG's Indian operations. Verma's firm has tied up with India's largest industrial conglomerate, the Tata Group for an insurance joint venture.

The Parliament had already approved reform bill, paving the way for it to become a law and end decades of state monopoly. The legislation now requires the signature of the country's President. Verma said several steps including the President's approval was needed before licenses could be issued.

"Then the IRA (Insurance Regulatory and Development Authority) will form an advisory committee consisting ofmaximum of 25 people who will assist in framing the regulations," he said. "These regulations will then have to be tabled in both the Houses of Parliament and thereafter the IRA will invite applications and it will be a 90-day window in which they will invite these applications."

The Indian insurance market was likely to see intense competition firms which could provide low-cost solutions in the long-term were likely to succeed, he said. "Competition is going to be very keen as all the big players around the world have focused on India and have been here for quite sometime," he said.

He said the market held vast potential as it was "under served and under penetrated". He said the existing state-run firms - Life Insurance Corporation and General Insurance Corporation - would continue to dominate the sector on account of their network and age-old relationships.

"As has been the experience in countries like Korea, Taiwan, even after many years of liberalisation, foreign companies have a small share. Thesame will be repeated in India," he said.

The biggest beneficiary of the reform was going to be the infrastructure sector as the country's debt markets got a boost as premiums collected by the new firms sought long-term assets for investment. "In India there is no long term debt market and the entry of new players and demand for more long term funds will create a long term debt market which will give a boost to infrastructure spending in the country," Verma said.

Life Insurance Corporation, which has monopoly in the sector, is confident Tuesday's approval by parliament to open the sector to domestic and foreign players will not dent his company's growth. "I don't expect them to take away my share. My growth rate will remain because they (the new firms) will tap untapped markets," LIC chairman G Krishnamurthy said.

LIC's premium income grew by nearly 19 per cent to Rs 22,810 crore ($5.2 billion) in the year ended March 1999. Including investment earnings, LIC's total income during the year rose to Rs36,350 crore. "Internationally, people who have later entered the market have not been able to eat into existing players in a big way," he said.