Last updated on: December 20, 2011 16:59 IST
If all of this doesn’t spell doom for an already beleaguered industry another important statistic will make foreign insurers think twice about heading towards Indian shores. “If you look at 15 different markets in Asia where we are present, the lowest margins of all markets is in India,” said mark Tucker Group Chief Executive and President, AIA.
According to a latest study by McKinsey, the returns and profit margins in India is one of the lowest in the region. The study shows, return on reserves from the life insurance sector in India is the lowest, at -27 basis points, whereas it is 110 basis points in China.
Similarly, the profit margins or the new business adjusted profit (NBAP) margins in India is at 18 per cent, faring poorly with China, where the NBAP in the same period stood at 30-60 per cent.
“In the past decade, ending 2010-11, the total capital invested by private sector life insurers was over $7.5 billion, of which 50 per cent or close to $4 billion was invested to fund accumulated losses, which have largely been incurred to create distribution capacity,” the report said.
“A lot of this investment were made with an underlying understanding that the sector will be opened up to the foreign players. however, it has been 8 years, since the issue of raising the FDI cap to 49 per cent is pending with the parliament. Foreign promoters will not invest any further if there is no policy road map ahead of them,” said an analyst.
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