More banks eye non-life insurance businesses
16th May, 2008
More banks are expected to venture into non-life insurance businesses, according to sources in the government, following SBI’s recent initiative to float a non-life company with an Australian major.
Banks lending to borrowers for creation of assets, have captive customers for their non-life ventures, since these borrowers would need to protect or secure their assets.
Although several state-owned banks rushed to float life-insurance subsidiaries, a business that has been growing at 25% per annum, there is growing interest for non-life businesses too, despite the fact that non-life insurance has been growing at only 12%.
“With SBI entering the non-life space, other will take cues and roll out similar operations. There are indications that several other banks will ready operations for non-life businesses,” a source in the government said. The penetration of general insurance is much lower than it is for the life business. Premium as a percentage of GDP for non-life is less than 0.5% of the GDP, while it is 1.8% for life insurance. The general insurance industry is predicted to grow 15-20% per annum over the next ten years.
So what explains this interest for the non-life business? Ashvin Parekh, partner, national leader – global financial services, Ernst and Young, said, “The ability of a bank to sell a non-life product is much greater than a life product. Since life insurance for a customer could often be from the point of view of savings, non-life products are usually mandatory since borrowers also want to cover their risks. Banks can therefore leverage on the large distribution networks they have for pushing these products.”
Source : http://economictimes.indiatimes.com/
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