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Tuesday 19 May 2015

India may get regional insurers soon

India may soon have regional insurance companies operating only in select locations and regions.

In its amendments to the Registration of Indian Insurance Companies Regulations (draft), Insurance Regulatory and Development Authority of India (Irdai) has asked new applicants to specify the city, region or concentration (rural/urban) that they will concentrate on.

Senior Irdai officials said that they would like to have insurers in specific regions.

"Prospective applicants need not open branches all across the country. They can have operations only in few cities or rural, urban centres," according to an official.

For the regions, the options are north, south, east, west and central. Similarly, insurers can give details of which metropolitan city they wish to operate in, including Mumbai, Delhi, Calcutta or Chennai. Their rural, urban concentration can be pre-determined at the time of application for a license with the regulator. 

Industry officials said that while new applicants may not look into having operations only in few metro cities, having a rural or urban presence can in fact help them build a niche. Till now, all insurers have all-India presence though business is generated only from a few cities.

"Out of the fifty plus insurers, each insurance company is strong only in a few locations and regions. Public sector insurers largely have been dominating in the rural areas. It will be beneficial for policyholders if there are new insurers only looking into specific regions,” said the chief executive of a private life insurer.

However, some insiders said that the capital requirement of Rs 200 crore could be a deterrent for small players entering as regional insurers. In its draft, the regulator has specified that irrespective of where they operate, all new entrants into the industry would have to maintain a minimum capital of Rs 200 crore.

Earlier, there were a few interested firms who wanted to enter the industry as regional health insurers when it was proposed that capital requirement will be brought down to Rs 50 crore. Regulatory officials had also decided to give a go-ahead to these firms, but in the end capital requirement was not brought down.

To have a niche category of insurers that differentiate themselves from others, the applicants have also been asked to specify which distribution channel they would use - online, direct, tied-agents, brokers among others.

Source: Business-standard.com

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