New Delhi, Sep 21 (UNI) Seeking Australian participation in the insurance sector in India, Minister of State for Finance Pawan Kumar Bansal today said the field is poised for "tremendous expansion." Addressing a meeting of Insurance Australia Group in Sydney, Mr Bansal gave a profile of the fast growing insurance sector.
He said banks have entered the insurance sector in the form of corporate agencies or under referral arrangements to utilise the extensive and broad reach for marketing of insurance products.
He said that IRDA has also notified Micro Insurance regulations facilitating insurers to tap the potential of rural markets.
As per these regulations like Non-Government Organisations (NGO), Micro Finance Institutions (MFI) and Self Help Groups (SHG) have been recognised as micro insurance agents.
"It is envisaged that micro insurance would facilitate penetration of insurance to rural and remote areas", he said.
He said that Micro Insurance being an integral part of overall insurance system, attempts are on to offer the target specific insurance products at a relatively lower cost, for a lower coverage of amount.
The Minister noted that foreign equity upto 26 per cent is allowed in the insurance sector. The entry of foreign partners has resulted in the sector attracting FDI of 543 million dollars as on March 31, 2007.
Mr Bansal said private companies have created a niche for themselves. They have been able to increase their share in the insurance market in competition with their counterparts in the public sector. As a part of the reform process, premium rates for non-life insurance products have been de-tariffed with efect from January 1, 2007.
Mr Bansal said that in insurance sector though the growth in recent years has been significant, India was far behind the world averages and ranks 78th in terms of insurance density and 54th in terms of insurance penetration. The world averages are 469.6 dollars in terms of insurance density and 8.06 per cent in terms of insurance penetration.
Against this, insurance density was 19.70 dollars and insurance penetration was 3.17 per cent in India for the year 2003.
However, these two indices have increased following the opening of this sector.
Mr Bansal said the Insurance Regulatory and Development Authority has granted registration to 37 insurance companies, which include 17 life insurance (including one PSU), 19 non-life insurance (including four PSUs) companies and one re-insurance company. At present seventeen insurance companies are operating in the general insurance side and seventeen insurance companies on the life side.
He said India offers a stable investment climate as well as a huge market with a growing middle class.
Mr Bansal said Investor confidence in India is at an all time high today. A T Kearney in 'The FDI Confidence Index 2005' has ranked India as the 2nd most attractive investment destination just next to China whereas 'World Investment Report, 2005' ranked India as the second most attractive investment destination among Transnational Corporations, he said.
He said that FDI is now permitted in 21 activities through the auto-route. These include FDI in development of townships, housing, built-up infrastructure and construction development projects, exploration and mining of diamonds and precious stones and insurance.