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A week after acquiring ING Vysya bank in an all-share deal, private-sector lender Kotak Mahindra Bank has announced it will foray into the general insurance business.
The lender received the Reserve Bank of India’s approval on Tuesday to form a subsidiary for general insurance. The bank has already received an in-principle appro-val from the Insurance Regulatory and Development Authority (Irda).
Now Kotak will have to apply for licences from Irda and the approval process is expected to be completed by the end of June quarter next year. The lender expects to start the general insurance business by the July-September quarter of the next financial year.
The subsidiary will have an initial paid-up capital of Rs 100 crore and it will be headed by Mahesh Balasubramanian, who has been named as the CEO of the general insurance business. He is currently the executive vice-president and co-head of branch banking at Kotak Mahindra Bank.
Despite the fact that there are already 28 general insurance players in the market, Kotak is confident of gaining market share and is aiming at a business of Rs 800-900 crore in the next five years.
“The general insurance business in India is currently a Rs 77,000-crore premium per annum industry and is growing at 17 per cent. We will be able to leverage on our strong branch networks and our life insurance agents and will be able to capture 0.5 per cent of the total market in the next five years,” said Gaurang Shah, president (asset management, insurance and international business), at Kotak Mahindra Bank.
The general insurance firm will be focusing on motor, health, fire, marine and other commercial lines of businesses. Going ahead, the company will also launch other products such as travel insurance.
Kotak is already in the life insurance business with Kotak Mahindra Old Mutual Life Insurance, which is a joint venture between Kotak Mahindra Bank and South Africa-based Old Mutual. In the second quarter of this financial year, the life insurance subsidiary had reported a profit of Rs 52 crore.
However, for the general insurance business, the lender is not looking at a foreign partner right now. “We are not looking a foreign partner now but we are not averse to it. We will keep our options open at a later stage,” said Balasubramanian.
Currently, Kotak has a tie-up with Tata AIG to sell and distribute its products. Shah said this agreement will come to an end once Kotak starts rolling out its own general insurance products.
Going ahead, for its non-life insurance business, the company plans to hire 250-300 people.
Disclosure: Kotak Mahindra and associates are significant shareholders in Business Standard Limited
