The report points out that the penetration of the insurance industry premium as percentage of the country’s gross domestic product (GDP) has increased from 2.3 per cent in 2001 to 5.2 per cent in 2011.Life Insurance Corporation, the country’s largest life insurer belonging to the public sector is taking advantage of this high growth potential and it plans to invest more than Rs. 2 lakh crore across various asset classes in 2011-12. Analysts say that this is positive for equity market and the insurer’s investment will mainly be directed towards FPOs and IPOs of public sector companies that are lined up in 2011.

At the industry level, there is a big debate on the recommendation made by the PricewaterhouseCoopers (PwC) last week in its report that there is need for a healthcare regulator under the Insurance Regulatory & Development Authority (IRDA).Industry sources point out that instead of IRDA, the regulator should be under the health ministry to monitor the quality of services and pricing offered by the hospitals and other players.

The insurance industry’s point is that the objective of appointing such a regulator should not be confused with IRDA’s regulatory role in the insurance sector. The industry feels that PwC’s suggestion is an attempt to influence IRDA’s functioning by the healthcare industry. The health ministry is very much alive to the health problems of the common masses, especially the critical illness cover and various ideas are being examined to formulate a model insurance cover for critical illnesses.

An expert committee on health has recommended that it could also be considered wherein government could provide cashless treatment for critical illnesses for all citizens in select hospitals. Such a programme could be administered through something on the lines of health financing cess. The funding for such a set up is proposed to be administered under a single payer system. Under this, a public health insurance agency is proposed to be responsible for collecting funds and making payments for mandated healthcare services from a single source. Both Planning Commission and health ministry are involved in this exercise.

Meanwhile, the private insurance industry market is buzzing with reports of mergers and acquisitions as the Government is likely to get the approval of the Insurance Laws (Amendment) Bill in the monsoon session of Parliament in July-August this year. Big corporate houses which are interested in entering the insurance sector are examining the possibility of both setting up new units as also taking over the existing companies.

Reliance Industries Ltd, the largest private sector company of the country belonging to Mr. Mukesh Ambani have big plans for the insurance sector and the company started discussions with Bharti for taking over the stake of the Mittals in the joint venture Bharti Axa Life. Bharti has been looking for an exit route from the lirfe insurance business for quite some time but they were interested only in a good price. RIL has very ambitious plans for the financial services sector and it wants to have both life and non life operations. The Bharti stake in the JV suits its strategy.

Bharti Axa Life is one of the struggling players in the insurance industry with a market share of only 1.1 per cent. The firm in which Bharti owns 74 per cent equity and the Paris headquartered Axa group holds 26 per cent, started operations in 2006.The company’s new business premium income dropped 17 per cent to Rs. 364 crore in 2010-11.

For the private insurance industry in the life sector, the financial year 2010-11 was not comfortable. The 22 companies only clocked 3 per cent growth in new premium income during the year. LIC which has seen its composite premium income growing by 22 per cent to Rs. 86,445 crore in 2010-11 has gained market share of almost 4 per cent to 68.7 per cent in terms of premium and 7 per cent to 77 per cent in garnering policies in the year. The industry has grown by 15 per cent in new premium income to Rs.125,826 crore in 2010-11.

LIC is targeting a growth of 15 per cent in policies and 25 per cent in premium income in 2011-12. In the general insurance sector, the research firm Crisil has projected underwriting losses of the domestic general insurance companies at Rs. 10,000 crore in 2010-11 fiscal. This increase reflects weak underwriting performance, increase in reserving requirements for each of the first four years on the TP motor insurance pool and wage revisions in the public sector insurance companies. (IPA)