The Insurance Regulatory and Development Authority (Irda) has allowed insurance companies in India to conduct business overseas. The companies can do business in the life insurance, non-life insurance and in re-insurance space.
“The regulator has allowed us to open a company as well as branches abroad. But this will also be dictated by the local regulations. There are some countries, such as India, that don’t allow foreign insurers to open branches but the UK, for instance, allows branches,” says Tapan Singhel, managing director and chief executive officer, Bajaj Allianz General Insurance Co. Ltd.
According to Irda, a foreign company would mean a company registered outside India whose paid-up capital is subscribed to by an Indian insurance company and shall include a foreign subsidiary company wherein the Indian insurance company has a holding of more than 50% of its paid-up capital or is in a position to control the composition of its board of directors. It shall also include a branch office of the Indian insurance company.
In order to open offices abroad, Irda needs insurers to be at least three years old with a net worth of at least Rs.500 crore in case of a life insurance company and Rs.250 crore in case of a non-life company. In order to ensure that these companies have sound financial health, Irda has also stipulated that these companies should have made profits for at least three years out of the last five years.
In addition to this, the insurer should have a clear track record of regulatory compliances for three years out of the last five years. “Except LIC (Life Insurance Corp. of India) there aren’t many companies with a profit record of more than three years. Also private insurers already have foreign partners who are operating in most markets of the world, it makes little sense for these companies to go abroad just yet,” says Kapil Mehta, founder, Securenow.in, an insurance broker.
What does it mean for customers?
Even as the insurance regulator has allowed insurers to set up offices abroad, the products that they are able to offer will depend upon the local jurisdiction of the country they are operating in. “What products we can offer will depend on the local jurisdiction of the country we are operating in. So if we are not allowed to sell rupee-denominated products as per the local rules, we will have to obey it,” says Amitabh Chaudhry, managing director and chief executive officer, HDFC Life Insurance Co. Ltd.
So as a non-resident Indian (NRI), if you are looking to buy rupee-denominated insurance products, you will have to buy it from India. “For NRIs who live in countries such as the US, the UK and Singapore, insurance products are cheaper. For instance, term product rates in the US are about 25% cheaper than India,” says Mehta.
Also insurance products in most countries come with tax incentives. “The tax rules of the country in which the insurer operates will apply. Most countries offer generous tax breaks on insurance products,” says Anand Pejawar, executive director, marketing, SBI Life Insurance Co. Ltd.
Insurers who operate abroad
So far only state-owned insurers have offices abroad. For instance, in the life insurance space, only LIC has offices in the Gulf countries and sell dollar-denominated products such as term insurance plans, traditional insurance-cum-investment plans and unit-linked insurance plans (Ulips).
In addition to offering products, these offices also provide service to NRIs that have LIC policies from India. LIC has a separate website for its international business (www.licinternational.com). State-owned general insurer New India Assurance Co. Ltd has 23 offices abroad. Most of these offices were set up before Irda came into being in 2000. “Private insurers mostly have liaison offices abroad as there wasn’t much clarity on opening branches abroad,” says Pejawar. The circular, however, has clarified the norms.
http://www.livemint.com/Money/rcoUEfBb0qUuoymcYkMRLO/Indian-insurers-can-set-up-offices-abroad.html
