Fdi in Insurance

Topics: Investment, Insurance, Economics Pages: 2 (546 words) Published: March 22, 2013
FDI Benefits in Insurance Sector:
1. - Increases healthy competition
* Our country has a low insurance density and every company selling the insurance feels that there is abundant scope to expand its operations

2. - Improves Product offerings
* technical knowhow is also transformed in the country * Foreign capital not only brings along with it deeper pockets, but also i. greater product expertise,
ii. better underwriting skills and
iii. superior technology,
all of which can be instrumental in enhancing the insurance sector greatly. * There can no longer be a one-size-fits-all kind of approach to business and both the core strength of the sector and individual product innovation has to be encouraged. *

3. - Adequate capital for insurance companies through cheaper inflows * a lot of capital is still required to usher in some meaningful changes in the sector. * Long-term foreign capital will be required to bring about second generation reforms in the insurance sector. * This capital will help in giving a veritable push to the distribution and the social sector penetration. * short-term perspective where a move like this will bring in capital flows and instill confidence in the India story, when the world economies seem to be in doldrums. *

4.       - Improves Insurance Penetration
* McKinsey shows that the insurance market in India is the “least” profitable among all its Asian counterparts (greater opportunity for growth) * The returns and profit margins in India are the lowest in Asia. The returns on reserves from the life insurance sector in the country stand at 27 basis points whereas in China it is 110 basis points. * Similarly, the profit margins or the new business adjusted profit (NBAP) margins are at 18%, faring poorly in comparison with China, where the NBAP in the same period stood at 30% to 60%. The study also shows that over the...
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