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Private insurance firms seek to invest abroad

By Our Special Correspondent

NEW DELHI OCT. 14. The private insurance players, who have captured 10 per cent of the market share within two years, have reconciled to the 26 per cent foreign equity cap that is permitted in this sector. However, a majority of the players want permission to invest the premium funds abroad, which is not allowed as per the current law.

A survey of the insurance sector by the Federation of Indian Chambers of Commerce and Industry (FICCI), covering 147 respondents, has found that only 41 per cent of them considered the limitation of foreign equity as a roadblock to expanding their business. On the other hand, on the question of permission to invest funds abroad, as many as 60 per cent of the respondents wanted such permission to be given.

Similarly, an overwhelming majority of 79 per cent of the respondents preferred a single regulator for the insurance and pension sectors instead of two different regulators in existence today. Besides, 67 per cent of the respondents wanted the insurance industry's involvement in the accumulation stage of the pension business and did not want to restrict themselves to the annuity business only. Also, 67 per cent of the survey respondents wanted the Varishtha Pension Scheme (senior citizens pension scheme) to be extended to the private sector companies. At present, the Life Insurance Corporation (LIC) operates this scheme.

About entering the rural markets, 84 per cent of the respondents felt that lack of proper distribution network would hinder growth in the rural areas. Without any effective channel to distribute, there would be no buyers and sellers and, hence, no market. Also, 58 per cent felt that the low literacy level would hinder growth in rural areas. At the same time, a number of suggestions were forwarded like tying up with rural banks, rural post offices and cooperative societies to market insurance in the rural areas. Tying up with non-governmental organisations and consumer durable suppliers was the other suggestion.

In the case of health insurance, the survey found that almost 88 per cent of the respondents indicated lack of proper system of supervision of health care service providers was a key challenge, followed by lack of database. About 50 per cent of the respondents considered lack of product variants in the market as a stumbling block since a single product had limitations in market penetration.

Essentials for a large insurance market include a range of health insurance products ranging from pure indemnity policy to managed indemnity policies, hospital based pre-paid plans, old-age health plans and long term care plans. There should also be products that could be brought as supplements to a base product, depending on individual needs.

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