Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
The Indian parliament is one step closer to opening its insurance market to greater foreign direct investment. In a move designed to spark India's economy, the cabinet in early October approved measures that, among other things, would allow foreign insurers a 49% stake in Indian operations. India currently limits that investment to 26%. But how close foreign insurers are to being able to double their investment in India is uncertain.
A similar measure stalled in India's parliament in 2008, and expectations are that factions inside parliament will oppose the latest effort to boost foreign direct investment in the insurance sector. The measure would be the latest in a series of Indian insurance reforms since 2000.
The government opened insurance to foreign investors more than a decade ago. As a result, the insurance market expanded from a handful of companies to nearly two dozen, including many joint ventures with foreign investors, notes Sanjay Kedia, country head and managing director at Marsh India, a subsidiary of Marsh. In 2007 regulators removed tariffs from insurance pricing, which triggered an 85% drop in rates, Kedia says.
If India's parliament approves the cabinet's latest FDI proposals, even more insurers and competition will be drawn to the country, predicts brokerage executive Claude GaIIeIIo, international practice leader at Willis Group. The cabinet also proposed easing limitations on foreign investments in the retail, aviation, power trading and broadcasting sectors.
If approved, GaIIeIIo says, it would not have much impact on products for commercial risks. Insurers already have rate and form freedom for large commercial accounts. Rather, foreign insurers would have much greater opportunities in India's burgeoning personal insurance market. India's population of more than 1 .2 billion is growing in excess of 1 .3% annually and is projected to surpass China's by 2030.