If you are asked to say something about the benefits of opening up of the insurance sector in India, what could your answer be?
- Insurance penetration has increased from a niggardly 2.32 % at the time the sector was opened up to private sector participation in 2000 to more than 5% in 2007.
- The first year premium collections in life insurance, a measure of new business secured, has gone up from Rs 9,700 crore in 2000-01 to Rs 75,600 crore in 2006-07.
- Industrial houses which have forayed into this sunrise sector have seen spectacular growth and have overtaken the valuations of their parent companies. For example Bajaj Auto’s seven-year-old insurance business has overtaken its 60-year-old parent company in market value. Bajaj Auto is not an exception. Multinational companies that were smart enough to see the potential in the sunrise sector, despite the low 26% ceiling for foreign direct investment, have been amply rewarded.
- It is not only insurance companies and individuals who have benefited in the process. The close link of the insurance sector with infrastructure is widely acknowledged — insurance companies typically look for avenues for long-term investment while infrastructure companies need long-term funds — so a rapidly growing insurance sector is good news for all concerned.