Several global insurance majors that were scouting for joint venture partners to enter the domestic market have put their plans on hold as overall costs have risen after new guidelines from Insurance Regulatory and Development Authority (IRDA) and uncertain policy framework.
South Korea’s Samsung Life Insurance, French firm Scor Global Life and Canada based Manulife were among that were interested in entering the widely untapped Indian market and were looking for domestic partners.
A host of life insurance firms that are already present in India have also resorted to restructuring exercise while significantly reducing headcount to cut costs.
Several mid sized insurance majors were also looking to rope in a third partner to support their businesses.
“The guidelines that have been issued by the regulator are consumer centric and that is critical, we need to fist think of the consumer as they put in a lot of money into insurance products which is meant to come handy at their hour of need. We cannot keep thinking about companies’ profits throughout,” a senior finance ministry official said.
The IRDA, for Unit Linked Insurance Policies (ULIPs) — hybrid life insurance products — has capped surrender charges of policies, slashed agent commissions. The move would benefit customers as the charges become more transparent while preventing mis-selling. However, insurers are worried as the move will reduce their profitability.
The regulator is also expected to come up with a product guideline soon.
“Companies that were keen on entering the market here have either their plans or deferred their plans due to ambiguity in regulatory and policy framework,” a industry insider, who did not wish to be identified told Hindustan Times.
On Wednesday, Prime Minister Manmohan Singh, who took charges of the finance ministry, has indicated that the government would take steps to revive the insurance sector.