When Indian President K.R. Narayanan signed landmark legislation last January, opening India’s insurance market to foreign competition, he unleashed a potential revolution in the highly regulated sector. While not freeing the market entirely from local control—foreign insurers are limited to a 26 percent ownership in Indian companies, and must have a local partner to do business there—the reforms promise to open a vast market of over 1 billion people to the global insurance industry.
In a recent interview with Reuters, Nick Helms, CGU’s chief representative for India, called it, “the last bastion of controlled markets around the world,” and said that, “The insurance world is looking upon India because this is the last real potentially large market that hasn’t been opened up.”
CGU already has two joint ventures in the works, one with Bombay-based Wadia Group for general insurance, including health, and another with Delhi-based Hindustan Times group which will concentrate on life products. Helms stressed the importance of building up service standards, and seeking local business.
“The type of business that we’ll be after will be personal lines, small and medium enterprises and commercial,” he told Reuters. “We want to hold risk. We don’t want to earn fees or commission from re-insurance.”
CGU has company from a number of other leading global insurers, who have taken stakes in, or concluded partnerships with Indian companies. They include: AIG, which has teamed up with Tata Group, India’s largest industrial conglomerate; Allianz, which is working with Alpic Finance; ING which has concluded a financing deal with Vysya Bank, and the UK.’s Prudential Life, which has ties with financial service firm ICICI Ltd.
All of them hope to receive permission to operate from regulatory authorities later this year India’s well developed technology industry means that operations can be highly computerized from the beginning, and data processing facilities can be used for other company groups. General insurance premiums were $1.35 billion in 1999, and growth is around 12 percent a year. This is expected to increase once the foreign firms begin operations.
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