A move that may end the drought of new players in the sector, the Indian life insurance sector will soon see an entry of a new venture as the Indiabulls group,owning the second largest private sector housing finance company in the country, is once again looking to expand into the life insurance business. Prominent enterpreneur Laxmi Narayan Mittal is a major promoter in Indiabulls.
The group has already applied for a license to the IRDAI and the insurance regulator in its forthcoming board meeting on Sep 27 may give its first level of approval, known as R1,to the company.
This would be group’s second attempt as a few years back the group with joint venture with French major Societe Generale had planned to enter the life insurance sector but shelved it at the also moment,
One of the main reasons why Indianbulls has decided to re-enter the industry, can be attributed to the rapid growth of housing finance business of the group in all these years. It can have a synergy with that of the proposed life insurance business. Besides, the group has no dearth of capital and can withstand the long gestation period of a life insurance business, said sources close to the group..
It is not yet known who are the other share holders in the new life insurance venture as a non- banking finance company, it can have only 74 per cent in the proposed entity and whether the proposed insurance company will have a foreign partner.
Currently, Indiabulls Housing Finance Limited, India’s second largest private housing finance company, is one of the large corporate agent of the HDFC Life.
Last year, Indiabulls Housing Finance had sold its 100 per cent shareholding in 'Indiabulls Life Insurance Company Limited', presently a non- operational company with no business or license, to SORIL Holdings and Ventures Limited ('SHVL'), at face value for an aggregate cash consideration of Rs 5 lac,
With the Indiabulls foraying into the domestic life insurance sector,the industry has seen a new player after a long time. The sector had seen more exits, particularly of the foreign players and slow-down since 2010.
Also, the proposed life insurance company of Indiabulls will be the second company, after HDFC, that owns HDFC Life, to be floated by a housing finance company.
The total numbers of 24 life insurers including state owned Life Insurance Corporation(LIC) have remained static for almost last six to seven years as no new players have ventured in to the sector,On the contrast, the number of players in the non-life industry including the health insurnace are increasing steadily every year.As of now, there are 33 non-life players and more have applied for licenses. .
Last year, a joint venture, formed since 2012, between Ergo, a Munich Re group company and The Avantha Group, an Indian business conglomerate led by Gautam Thapar, had applied for a life insurance license but had called off the joint venture before getting the final approval for the license.
On why there have been no new players in the sector where there is so much of underpenetration, V Manickam, Secretary, Life Insurance Council, said “It may be commercial call of the investors. No new player has joined the industry for the past seven years, which may be due to long gestation period, which the life insurance companies are facing in India and the promoters and joint venture(JV)partners may be reluctant to wait for long period.’’
The asset under management (AUM) of the industry has gone up by Rs.3.3 lakh crore during FY 2017-18.
The Total asset of the industry is currently around Rs 34 lakh crore (Provisional) and the AUM is around Rs.32 lakh crore (Provisional).