Date:29/02/2008 URL: http://www.thehindubusinessline.com/2008/02/29/stories/2008022950751000.htm

Back Survey suggests 49% FDI in insurance

Insurance penetration up from 2.32 in 2000 to 4.8 in 2006

Since opening up of the sector, the number of participants in the sector has gone up from six insurers in 2000 to 37 insurers operating in the life, non-life, and re-insurance segments as on December 2007.

Our Bureau

New Delhi, Feb 28 The Economic Survey, tabled in Parliament on Thursday, has suggested that the foreign direct investment (FDI) in insurance be increased to 49 per cent from the present 26 per cent.

The survey also pointed out that 51 per cent foreign equity be allowed in a special category of insurance companies that provide all types of insurance — health, weather etc, — to rural residents and for all agricultural related activities including agro-processing.

Insurance penetration

It said that the insurance penetration increased from 2.32 (1.77 in the life segment and 0.55 in non life) in 2000 to 4.8 in 2006 (life 4.1 and non life 0.6).

Insurance penetration is defined as the ratio of premium underwritten in a given year to the GDP and it is a measure of assessing the potential and performance of the insurance sector universally.

The other parameter used is insurance density, which is defined as the ratio of premium underwritten in a given year to the total population.

“The increase in the levels of insurance penetration has to be assessed against the average growth of over 8 per cent in the GDP in the last three years. On the other hand, in the other emerging economies in Asia — Malaysia, Thailand and China — during the same period was 4.9, 3.5 and 2.7 respectively,” the document stated. The insurance density also increased from $9.9 in 2000 to $38.4 in 2006.

“Since opening up of the sector, the number of participants in the sector has gone up from six insurers in 2000 to 37 insurers operating in the life, non-life, and re-insurance segments as on December 2007. This also includes specialised insurers like the Export Credit Guarantee Corporation, Agricultural Insurance Company (AIC) and two stand-alone insurance companies,” the Survey has said.

It added that out of the 17 life insurance companies, 15 are in joint venture with foreign partners, and of the 10 in the non-life segment, 9 are with foreign collaboration. Thus, as on date, 26 insurance companies in the private sector have been granted registration in collaboration with foreign insurance companies.

The survey has also pointed out that a Weather-based Crop Insurance Scheme (WBCIS) was implemented in selected areas of Karnataka on a pilot basis.

The AIC implemented the WBCIS during kharif 2007, covering eight rain-fed crops, insuring crops on nearly 50,000 hectares for a sum of Rs 50 crore. The scheme is being implemented in selected areas of 12 States for rabi 2007-08 and in addition to AIC, ICICI-Lombard General Insurance and IFFCO-Tokio General Insurance have also been included for the selected areas.