Global insurers have been participating in the Indian insurance market for nearly 12 years. We may soon see the trend reversing.
The Insurance Regulatory and Development Authority (IRDA), the country’s insurance regulator, has laid down rules for Indian companies to start overseas operations. The criteria being: net worth of 5 billion rupees for life insurance companies, 2.5 billion rupees for general insurance companies and 7.5 billion rupees for re-insurance companies. In addition, the companies should have made a profit in at least three of the last five years.
The profit criterion rules out a large number of private insurance companies in India for now. It must also be noted that most private insurance companies in India – both in the life and general insurance space – were set up in partnership with global insurers. So they would not want competition in countries where their partners are already operational.
But in a few years from now, if the story in India turns out really well, we may see them participating in places where both partners are not present.
It would seem obvious to start operations in countries where there is a large Indian diaspora, but plans offered by these companies will have to be offered in the local currency and follow the rules set up by the local regulator.
So if an Indian wants a rupee denomination policy, he will still have to buy that through an insurance company in India. LIC and some of the government-owned general insurance companies already have some degree of global experience with operations in the Middle East, the Indian sub-continent and a few other places.
The most attractive markets would have a fairly robust insurance industry and it will take time and effort to establish a new entity, especially in a line of business that is capital-intensive.
But for state-owned insurers who have been operational for decades in a market like India, the experience might prove to be invaluable for the local partner.
If the Tatas could buy out JLR and Corus, who knows what opportunities lie ahead for LIC, New India and others. While it may take time for some big action, smaller buyouts and participation may happen in the near future.