Insurance biz set for foreign fund deluge

Relaxed FDI norms, low penetration present big opportunity: Milliman

MUMBAI: India’s insurance industry is likely to see more action going ahead as more foreign players will look to enter the market, which still remains under-penetrated, according to Milliman, one of the world’s largest provider of risk analysis and related services.

“Lot of companies missed the opportunity in the first, second and third wave of new entrants; either they were not looking at the time or they couldn’t find a right partner. Lot of those companies are almost certainly still looking at India as a big hole in their global portfolios,” said Richard Holloway, MD, South East Asia and India, Life at Milliman.

The NDA government in March passed a bill hiking foreign direct investment (FDI) in the insurance sector to 49%. Earlier this week, Japan’s Nippon Life said it would increase its stake in Anil Ambaniowned Reliance Life Insurance to 49% from 26% for ₹2,265 crore. British health insurer Bupa will invest ₹191 crore to hike its stake in Max Bupa Health Insurance to 49%. ICICI Bank too sold 6% stake in ICICI Prudential Life Insurance to Premji Invest and Singaporebased Temasek.

He says the increased FDI cap and stable macro and regulatory environment makes India more attractive for foreign players.

But, expanding in India will be a challenge for new entrants as the insurance business in India is largely driven by the agencydistribution model, where staterun Life Insurance Corporation (LIC) and few other private players have already established a strong network, said Holloway.

When asked why despite almost a year since the ordinance, no deal has been done yet, Sanket Kawatkar, principal and consulting actuary, Milliman India said: “Most of the companies don’t need capital immediately. But in the medium-to-long term the industry will need capital to enhance its footprint, enhance number of branches and do more distribution deals”.