Public sector insurers wary of SBI’s general insurance biz plans

5 May, 2008

Bangalore, May 5 With the State Bank of India poised to enter the general insurance business by December, public sector insurers are increasingly becoming tense.

Highly-placed sources said that SBI’s entry was likely to trigger a major shakeout. “We were never worried about the private sector players. But SBI’s entry will change the rules,” sources said. They said that though SBI was yet to formally finalise its joint venture partner for the non-life insurance business, this was of little consequence. SBI is believed to have chosen an Australian partner for its non-life insurance foray.

PSU insurers’ worry stemmed from SBI’s reach and its track record in the life insurance business. SBI Life is currently the third largest private sector insurer, despite being a late starter. SBI’s network of over 10,000 branches and 4,500 branches of subsidiaries (both in the country and outside), gave it considerable distribution reach in the country. The four PSU insurers’ reach is nowhere close to this, even after factoring in bancassurance arrangements.

As a result, there were fears that SBI’s entry would result in further loss of market share, if the life insurance business model was replicated. Already competition from private sector has resulted in PSU market share erosion. PSU insurers, for the last financial year, had a gross market share of 60 per cent and gross premium collection of Rs 28,130 crore.

Source : http://www.thehindubusinessline.com