The development of the insurance market on professional lines will need time and organised effort, says Sanjay Sharma
The passing of the Insurance Regulatory and Development Authority (IRDA) Bill by Parliament and the subsequent issue of guidelines by the Reserve bank of India (RBI) have paved the way for the entry of banks in the insurance sector. Various public sector banks are keen to enter this apparently lucrative sector. No doubt, the potential for this business in India is significant.
For instance, the share of insurance premium to GDP in India is a mere about 2 per cent against 13 per cent in Japan, 12 per cent in the UK and 9 per cent in the US. As per an estimate, the annual premium for life insurance is expected to increase seven-fold during the next decade.
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Similarly, pension business in India is expected to grow 14-fold during this period. However, this potential cannot be interpreted as sure success for anybody and everybody. In this context, the strengths and weaknesses of Indian public sector banks vis-a-vis the specific requirements of the sector need to be examined carefully.
A review of the insurance sector across the world reveals that the