Japanese insurance players are analyzing opportunities to expand business to Indian market as the Indian government prepares to raise the FDI limit.
The insurance sector in India is now luring Japanese insurance giants, with players including Mitsui Sumitomo assessing opportunities to enter the Indian market. This zest of Japanese insurance companies follows the plan of Government of India to increase FDI cap to 49% from 26% in the sector, reported
finance buzz.
For the first time in 2004 Union Budget, the government had said of lifting FDI cap in the insurance sector to 49% and drafted a bill to accomplish the task in 2008.
Higher FDI leads to the liberalization of the insurance sector, drives growth and leads to long-term development, which is enough to lure foreign firms to the country. Due to this, the business enriches as it brings with it world-class business processes and practices, as well as distribution capabilities get expanded.
In fact, the government has realized that despite the tremendous success of LIC, attracting more FDI can be the only way to encourage investment from middle class consumers.
The Insurance Amendment Bill, which proposes the increase in FDI limit, if passed, could draw foreign capital of more than Rs 10,000 Crore into India, as per an estimate.
Industry experts are saying that once there’s hike in FDI cap, foreign players entering the country will begin the hunt for key domestic players as their partners. However, companies like ING Vysya and ICICI Prudential, which have already set good examples of successful insurance collaborations of Indian and foreign firms, will continue to dominate the market.
Here, it is worth mentioning that markets in majority of developed countries have almost saturated. Thus, the companies there are eyeing the emerging markets and India certainly offers more favorable insurance environment than any other emerging market with its increasing disposable income and low insurance penetration level. This is one of the key reasons attracting foreign investors to India, says “
Booming Insurance Market in India (2008-2011)”, a market research report by
RNCOS.
According to a Research Analyst at
RNCOS, “Increase in FDI cap is expected to make the insurance sector of India more efficient. The market will not only witness the entry of new players but will also see increase in stakes of the existing players. This will consequently increase FDI inflows. Above all, this will leave customers with a diversified range of competitive insurance products and enhanced service levels.”
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