AIG India chief executive Sunil Mehta says the most popular thing to insure in India so far is cows.
Rising wealth in India is curry-ing attention from companies like Liberty Mutual Group, which this month announced it would now sell property/casualty insurance to India’s “rapidly expanding middle class,” joining a small herd of foreign insurers already navigating the country’s market.
India’s new money makes it a potential goldmine, according to market researchers, if companies want to deal with tight government restrictions that include capping foreign equity investment at 26 percent. Also, a major lack of historical data on claims and morbidity makes setting prices extremely risky.
Holly Vineyard, U.S. assistant secretary of commerce for Africa, the Middle East and South Asia, said India’s infrastructure still presents some practical problems for companies – for example, the government would like to turn Mumbai into a major financial center, but companies there have to deal with extremely congested roadways and a single-runway airport.
But the 26 percent investment cap is the major hurdle to industry expansion, she said. “The [companies] who are there have seemed pretty happy, but there’s so much more they could be doing.”
Liberty Mutual will deal with these particular issues for the first time in India – the company demurred on discussing its specific plans for the region – but American International Group has built up some history there, having jumped into the insurance market as soon as it was opened to private insurers in 2000.
AIG India chief executive Sunil Mehta says companies have partnered successfully with Indian companies, and dramatically increased the ranks of carriers and agents in the country.
Only 800,000 agents sold life insurance throughout the entire country in 2000, he said, all as part of the state-run life insurance company. With private insurers working in the country, that number has now ballooned to 3 million.
“It is huge, explosive growth,” said Sunil said.
Analysts are also enthusiastic about India’s prospects, with Australia-based researcher The Knowledge Centre predicting a nearly a $77 billion market by 2011 – a $30 billion increase for a country that started as a $22 billion market when the insurance industry was first opened to private companies.
Mehta says Indian consumers now have more possessions to insure, or are starting to demand more choices in their investment vehicles. The country’s strong banking system and newly minted insurance agents have helped push the products, and consumers have been receptive.
But the potential for growth is enormous. The Knowledge Centre’s report goes on to say nearly 80 percent of the Indian population is still without life insurance coverage, while health insurance and non-life insurance continues to be below international standards.
Mehta downplayed the stifling effects of government regulation in the country, and said AIG has been able to turn some potentially onerous requirements into profitable ventures. The government requires companies to sell 20 percent of their policies in rural areas, he said, but AIG sold 31 percent of their wares in those areas, pairing up with non-governmental organizations to do the work in remote regions of India.
And what is the most popular item to insure?
“Cows,” Mehta said.
