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K.R. Srivats

Customer retention and persistency management are “front-burner” items for life insurance companies in the current times, says Mr T.R. Ramachandran, CEO and Managing Director, Aviva India.

Private life insurers who had a rather difficult October-December 2008 quarter are now focusing on “capital efficiency” and rebalancing their product portfolio to tide over the slowdown impact.

Faced with capital constraints, they are pinning hopes on the insurance Bill getting Parliament nod at the earliest, paving the way for increase in the foreign direct investment (FDI) cap from 26 per cent to 49 per cent.

Many banks that promoted life insurance ventures are finding it difficult to bring in more capital to meet the business needs of such companies. This has, in a way, compounded the problem.

“Increase in FDI cap will add to the foreign inflows into the Indian economy giving it a boost. It will also enable the insurance industry to grow and reach out to the length and breadth of the country. It will help launch innovative distribution channels and bring in global best practices,” says Mr Ramachandran.

The Metlife India Insurance Managing Director, Mr Rajesh Relan, says that enhancing the FDI sectoral cap in insurance to 49 per cent could result in inflows of about $1 billion into the industry.

“The insurance Bill is not merely about a hike in FDI limits. There are other benefits the Bill provides, which must not be lost sight of. For instance, passage of the Bill would help life insurers raise hybrid capital (like preference shares),” Mr Relan pointed out.

The heartening bit of news for the private life insurers is the latest IRDA data for the April-January 2009 period. For this period, the private sector has recorded 13.22 per cent growth in first year premium and 20.36 per cent increase in number of policies.

Life Insurance Corporation has recorded a negative variation of 1.89 per cent and 5.63 per cent in first year premium and in number of policies respectively.

More Stories on : Foreign Direct Investment | Life Insurance

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