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India

Insurance penetration is low and the market is huge, but strictly regulated and price-conscious.

India is a well-regulated market with a single national regulator—the Insurance Regulatory and Development Authority (IRDA), which was formed in 1999 as part of the IRDA Act.

During the early 2000s, the regulator allowed joint ventures with foreign investors as the first phase of liberalization of the market. Following the de-tariff in 2007, the market was faced with severe competition, especially in the area of property and engineering, according to Zurich. Motor and medical insurance represents 65% of the market.

General insurance penetration has been flat since 2001, but life insurance has increased slightly.

While the non-life sector is a free pricing market, the policy forms are tariffed and regulatory permission is required for any changes, according to Pavanjit Singh Dhingra, vice president of Prudent Insurance Brokers, network member of Gallagher Global Alliance and the Worldwide Broker Network.

“The tariff forms are the bare minimum cover to be added and companies are allowed to provide add-on covers provided they have regulatory approval for the same,” says Dhingra.

Non-admitted insurance is generally not permitted in India but there may be exceptions depending on the structure of the insurance program, say experts. Items to confirm with your insurers include whether DIC/DIL payments can be made into India to the local insured or to a third party suing for damages against a local insured.

For example, a recent claim payment for a fire that damaged an Adidas warehouse in India was still subject to taxes because any claim for the loss of goods within India is taxable. In this case, Adidas AG (parent company of Adidas Group) received about 900 million rupees (US $20.3 million), while Adidas India Marketing Pvt. received 470 million rupees (US $10.6 million) for the claim. The Indian tax authority said Adidas India should be taxed on the amount paid to Adidas AG after an investigation found that insurance compensation received abroad belonged to the local unit.

Zurich adds, “Our research indicates that although DIC/DIL may be allowed, payments to a local entity (insured) or a third party are typically restricted for DIC/DIL losses. Claim payments should be discussed with the broker and insurer with whom a company is placing their insurance program.”

For brokers, the market is split into international and locals, who tend to be more competitive and aggressive, according to Zurich. Brokers have to be authorized to do business, get their licenses renewed every three years, and aren’t permitted to place insurance on a non-admitted basis.

Additionally, premiums are paid directly to the insurer with the insurer paying commission to the broker, notes Dhingra. In terms of claims, brokers are not allowed by regulation to charge for claims or to offer claims consultancy, but are expected to assist on claims settlement for policies placed by them.

“Claim processing takes a lot of time and requires a great deal of resources of the client,” he says. “Loss adjusters are licensed by the IRDA and are appointed by the insurer.”

Overall, there is enormous opportunity for foreign insurers and brokers in India, which is an underinsured market, according to Rana Sarkar, president & CEO, Canada-India Business Council. Sunlife through its partnership with Birla, for example, has been in India for almost a century in some capacity—for as long as it’s been legal to sell insurance in India for a foreign company, he says.

“[India’s] a very price-conscious market as well, so business owners have to make sure their plan is flexible enough to change depending on the circumstances,” Sarkar advises. “But as long as you do your research, then get your India game on.”

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Insurance snapshot

  • 24 life insurers with annualized growth at 18%
  • 24 non-life insurers with annualized growth at 20%
  • 312 licensed brokerages; licenses are valid for 3 years and professional indemnity cover is mandatory
  • Compulsory insurances: motor third-party liability, third party liability for manufacturers of hazardous materials, aviation carriers liability, residential structures in Mumbai, professional indemnity for mutual fund managers
  • Up to 26% foreign ownership is permitted for insurance companies and brokers

Sources: Axco Insurance Information Services; and Prudent Insurance Brokers, network member of Gallagher Global Alliance and the Worldwide Broker Network 

More on BRIC countries: For Brazil, click here. For Russia, click here. For China, click here.

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Copyright 2011 Rogers Publishing Ltd. This article first appeared in the July/August 2011 edition of Canadian Insurance Top Broker magazine.

Transcontinental Media G.P.