Healthcare market hotting up
Aug 16, 2000

Author: PersonalFN Content & Research Team

In a bid to tap the huge non-life insurance market in the country, four medium sized state-run banks---Punjab National Bank, Bank of India, Allahabad Bank and Vijaya Bank have joined hands to take on bigwigs like Housing Development Finance Corporation (HDFC), ICICI and top corporate houses like Bajaj Auto, Reliance Industries Limited including others which have already announced a foray into non-life segment.

Industry sources are of the view that the non-life insurance market has a much wider potential compared to life insurance market. At present non-life market is managed by General Insurance Corporation (GIC) and its four subsidiaries.

The entry of public and private sector players into the non-life segment will serve as a boon for the `non-life product' consumers as they will have more options to choose from. The entry of new players will improve the services and quality of products offered by the domestic non-life product provider--GIC.

The conglomerate of these banks will hold 74 per cent, while the remaining 26 per cent will be with a foreign partner. This is for the first time that a few banks have come together to undertake non-life business while the country's largest bank--State Bank of India (SBI), Canara Bank and Andhra Bank are keen to enter the life sector.

The collective net worth of the four banks planning a foray into insurance is estimated to be over Rs 50 billion. All the four banks have strong base in their respective regions and their branch network will help them to distribute insurance products across the country.

The statistics available on the non-life market states that the premium growth in the non-life segment during fiscal 1999-2000 fell to 10% from 14% in the fiscal 1998-99.

The slowdown in the premium collections is largely due to the slowdown in new projects, which provide bulk premium to the insurers.

The fiscal 2000-2001 is expected to see market shares of public sector insurance companies go down further following the entry of new players.

The non-life segment is expected to be more susceptible to competition than life insurance because of the short-term nature of the life insurance contract. The competition is expected to expand the market for health and personal insurance by increasing awareness. At this stage, a need is definitely felt for improving the service quality of these two segments.