The benefits of increased FDI limit will be seen more in the long term: Arun Balakrishnan

Last Updated: Mon, Oct 08, 2012 19:31 hrs, a non-direct subsidiary of billionaire Warren Buffett’s Berkshire Hathaway, currently sells non-life insurance products to retail consumers in India through its website. In an interview with Somasroy Chakraborty, Arun Balakrishnan, chief executive officer of, says the company plans to enter the life insurance space soon. Edited excerpts:

How will the increase in foreign direct investment (FDI) cap benefit the sector?

The Cabinet approval of 49 per cent foreign direct investment in insurance is definitely a very positive sign, though we still need to wait and see whether it gets cleared by Parliament. Nonetheless, it indicates the government recognises the capital requirements of the insurance industry and is taking steps towards bridging the capital gaps.

The benefits of the increased FDI would be seen more in the long term than in the short term. Most prominent insurance companies have a presence in India and will be able to augment their shareholding.

This is also a window for Indian promoters to exit the insurance business if they feel it is not a part of their core growth strategy. Broadly, this would tend to create an environment, which consists of shareholders who are willing to invest and to stay committed to the Indian insurance growth story.

What are your growth plans?
Entering the insurance segment is a long-term commitment. The aim has been to build a sustainable model and offer great value to customers, while ensuring a robust structure to handle any claims, queries or concerns. Our immediate goal is to get as many products as possible online, so that these can be purchased instantly.

When do you plan to enter the life insurance space?
We already have a licence for life insurance with our current partners, Bajaj Allianz, and we are looking to actively enter this space.

We are internally gearing up in terms of product positioning, operational requirements, training and marketing to enable us to launch our online life insurance business.

We have spent the past year carefully understanding the online insurance sector and we believe this would give us a definite edge in servicing this segment. You should be seeing us joining the life insurance side soon.

One of your focus areas is travel insurance. Is it gaining popularity among Indian travellers?
Awareness among Indian customers is increasing day by day. Travel insurance offers cover for a host of travel-related perils, as well as health and medical requirements, that might arise during your travel. With the average Indian now travelling internationally more often than five years before, we clearly believe this is a segment that will pick up.

What are your views on the draft on a standard insurance product for rural and social sectors?
This is a good move to attempt greater reach and affordability of insurance for low-income groups.

In India, even today, the insurance penetration is only around six per cent of the total population, with 4.40 per cent in life and just 0.71 per cent in general insurance.

The Insurance Regulatory and Development Authority’s proposed draft on standard insurance products looks to deepen the market and enable inclusion.

However, further clarity is needed on the guidelines for implementation.

The main challenge will be developing and sustaining a viable distribution network. In underpenetrated areas, distribution and premium collections costs would escalate, making it difficult to offer the products at a nominal cost. One way this issue could be tackled is by building a robust online distribution and payment infrastructure, specialised to meet the needs of the rural population, along the lines of what e-choupal has successfully implemented.

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