Insurance Regulatory and Development Authority (IRDAI) Chairman Debasish Panda recently spoke of how India needs more global players to grow the insurance sector. Panda believes it is time to allow them to set up shop on their own without a local partner. A 100% foreign direct investment (FDI) policy, he says could bring in more foreign insurers.
The regulator is reading the writing on the wall. Many foreign players are unhappy that their local partners are not allowing them to raise their stakes in joint ventures (JV) and give them more say in running the business. Although the government liberalised the rules in2021, there are just a few JVs where the overseas insurer has a 74% stake. In 2022, Aviva upped its stake to 74% in AVIVA Life Insurance while Generali’s stake in Future Generali Life Insurance went up to 74%. Swiss Insurance giant Zurich now holds 70% in Kotak General Insurance.
Some players like Axa, have exited India. Abdrn, or Standard Life Aberdeen, exited HDFC Standard Life Insurance in June 2023 after a 22-year-long partnership. The last foreign player to enter the life insurance space was Japan’s Tokio Marine which floated Edelweiss Tokio Life. Some like Germany’s Allianz are divorcing their local partners but could end up marrying someone else.
As Kamlesh Rao, MD & CEO, Aditya Birla SunLife Insurance puts it, foreign players want the comfort of being in control and the satisfaction of being able to run it themselves without having to partner a local entity. “Psychologically, it makes a difference if they own 100%. They can always hire local professions to run the operations,” he points out. However, the truth, as Aniruddha Marathe, MD and Partner at Boston Consulting Group (BCG) points out, is that most large insurance companies are backed by financial institutions or conglomerates which are generally unwilling to give up control especially since the businesses are doing well and there’s potential to grow.
And they’re not apologetic about it. Vibha Padalkar, MD & CEO, HDFC Life Insurance, has discounted the need for a foreign equity partner, saying home-grown companies understand the needs of Indian customers better than their foreign counterparts. In Padalkar’s view there is no need for a foreign partner. “I think that ship has sailed where we need any intellectual horsepower from elsewhere,” she said in a recent interview.
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