Room for More Players as Penetration Still Low: Insurers

As consolidation wave begins in the insurance industry, some players have a contrarian view and feel there may be place for more insurers as the penetration level remains too low especially in non-life segment. Industry players feel that time is not ripe to go for consolidation as insurance penetration is too low. Non-life insurance penetration is a mere 0.8%, whereas in case of life insurance, it is around 3%.

Despite recent announcement of merger of HDFC Life and Max Life and acquisition of L&T General Insurance by HDFC Ergo, the players said industry has still a long way to go before large-scale consolidation can take place.
There are 24 life insurers, including state-owned Life Insurance Corporation, while there are 29 non-life insurers, of which seven are state-run. There are two specialised insurers the Agriculture Insurance Company, and ECGC and the sole reinsurer in GIC Re.

In fact, the industry wants more players to join the bandwagon so as to increase penetration.

"All the non-life companies are not doing well and underwriting losses continue to be a major worry. I think more and more players should be brought under insurance cover and for that we need more players," National Insurance Company chairman Sanath Kumar said. Private players also support this and say that consolidation is far away.

"It is too early to go for consolidation. There are very few players and the penetration is too low in the country when it comes to general insurance," Liberty Videocon General Insurance chief executive Roopam Asthana said.

"It is only a question of a few promoters that don't want to put any further capital into their ventures. So I will rather call some of the recent consolidations as accommodation rather than consolidation," he argues.

Bajaj Allianz Life managing director Anuj Agarwal said, "we will have to see if the objective of recent two mergers is served before we conclude if it is the right time to go for consolidation."

Reliance General Insurance chief executive Rakesh Jain opines that there are now a reasonable number of players on non-life space. Some of them may think of getting merged with the companies which are having larger size.

But it will be based on three basic principles which include new geography, new customer segment and new products, he said.