Foreign insurers go slow on India
Foreign insurers that have been waiting to enter the growing market in India are now weighing their options and reviewing the situation after IRDA came up with stringent norms. Mahua Venkatesh reports. Entry barrierindia Updated: Sep 29, 2010 21:43 IST
Foreign insurers that have been waiting to enter the growing market in India are now weighing their options and reviewing the situation after the Insurance Regulatory and Development Authority (IRDA) came up with stringent norms, which would impact their balance sheets.
South Korea’s Samsung Life Insurance, French firm Scor Global Life, Japanese major Mitsui Sumitomo Insurance Group and Canada-based Manulife among others are keen to tap the market here.
“Several insurers are re-evaluating their plans to enter the Indian market in the wake of the new guidelines which have been issued by the regulator,” an industry analyst familiar with the development who does not want to be quoted told Hindustan Times. A few of these companies could adopt a wait and watch policy before taking any concrete step, the analyst said.
The IRDA in its new guidelines for Unit Linked Insurance Policies (ULIPs) — hybrid life insurance products — has capped surrender charges of policies, slashed agent commissions. The move would ensure that the charges are more transparent while preventing mis-selling. This will reduce profitability of companies but also help consumers by making their investments more transparent.
A part of the money invested by a subscriber is set aside as premium, and the balance invested in equities. ULIPs comprise more than 50 per cent of the life insurance business, but have been characterised opaqueness in charges and fees.
Several life insurance firms in India have resorted to restructuring exercise while significantly reducing headcount to cut costs. Over 10,000 employees in the life insurance industry could lose their jobs in the next few months as the companies finalise their plans to slash wage bills. Most companies have engaged consulting firms to assist them with the restructuring plans.
ICICI Prudential and HDFC Standard Life among others could together lay off about 5,500-6,000 employees.
The insurance bill seeking to increase the foreign direct investment level from the current 26 per cent to 49 per cent is also pending in Parliament.