India Insurance industry growth likely to attract new entrants:FITCH

New Delhi, Mar 13 (UNI) Several new players are expected to enter India's rapidly growing insurance market in the next one to three years, especially if the Foreign Direct Investment (FDI) limit is raised, global rating agency Fitch said in a special report today.

The report while informing that most private insurance companies are joint ventures between Indian and foreign partners, in which the latter's share is currently capped at 26 per cent, said India's insurance industry has undergone major structural changes recently and now accounts for 10-15 per cent of India's total financial sector assets.

Despite the strong growth and improving penetration levels, the Indian market is still quite small and holds the potential to expand further.

Total gross premiums amounted to Rs 95,140 crore in FY05, split roughly 60:40 between life and non-life businesses respectively.

Total (life and non-life) premiums were equivalent to 3.17 per cent of GDP in 2004 compared to 8.27 per cent in the US, 7.89 per cent in Europe and 7.4 per cent in Asia as a whole. This potential for growth is likely to attract more players, the report added.

At present, there are 13 private insurers in the life sector and 8 in the non-life sector.

''Private insurers are rapidly gaining market share at the expense of the public sector and will continue to be aggressive in their attempt to capture an ever larger share of an expanding market,'' Fitch India Analyst Purvi Harlalka said, adding ''private insurers are able to do this because they offer greater choice in terms of products and services and also make a concerted effort to increase consumer awareness about the benefits and importance of insurance via vigorous marketing.'' Additionally, private insurers have also focused on developing alternative distribution channels -- among them corporate brokers, bank assurance, the internet and corporate agents. These have provided additional ways of getting products and services to customers, and now account for 25-30 per cent of private sector sales.

The agency also notes that the expected increase in the FDI to 49 per cent from the current 26 per cent will allow a fresh infusion of capital into the insurance sector, given the business' strong capital needs.

Fitch has recently introduced National Insurer Financial Strength (IFS) ratings in India which provide a relative measure of the rated entity's capacity to meet senior policy holders and contract obligations on a timely basis compared with other rated entities in the country.

Fitch Ratings is one of the three large global credit rating agencies and rates over 5,300 banks/financial institutions, including some 1,900 insurance companies, more than 2,000 corporates and 96 sovereigns as well as public finance, sub-sovereigns and structured finance transactions.

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