June 1, 2015
India may soon have regional insurance companies operating only in select locations and regions. In addition, irrespective of where they operate, all new entrants into the insurance industry would have to maintain a minimum capital of INR2 billion (US$31.4 million).
In its proposed amendments to the Registration of Indian Insurance Companies Regulations, the Insurance Regulatory and Development Authority of India (IRDAI) is asking new applicants to specify the city, region or concentration (rural/urban) that they will concentrate on, reported the Business Standard. Senior IRDAI officials said that they would like to have insurers in specific regions. “Prospective applicants need not open branches all across the country. They can have operations only in few cities, or rural or urban centres,” according to an official. At present, all insurers have an all-India presence though most business is generated only from a few cities.
For the regions, the options are north, south, east, west and central. Similarly, insurers can give details of which metropolitan city they wish to operate in, including Mumbai, Delhi, Calcutta or Chennai. Their rural, urban concentration can be pre-determined at the time of application for a licence with the regulator. “Out of the 50 plus insurers, each insurance company is strong only in a few locations and regions. Public-sector insurers have largely been dominating the rural areas. It will be beneficial for policyholders if there are new insurers only looking into specific regions,” said the chief executive of a private life insurer. However, some insiders said that the minimum capital requirement of INR2 billion could be a deterrent for small players entering as regional insurers.