MUMBAI: The Munjals of the Hero Honda group are getting into the life insurance business and are close to finalising a partnership with German insurer Ergo — part of the Munich Re group.
Sources said that the Brij Mohan Munjal family will be the promoters of the insurance venture and the group’s flagship Hero Honda may not take a substantial equity position in the insurance business.
The joint venture is the latest in the second round of rush for insurance licences. Multinationals are rushing to set up operations in India after witnessing the 100% growth in the life insurance business past year. At the same time, Indian promoters are now willing to come up with the capital required after seeing the $10 billion plus valuation for companies such as ICICI Prudential Life Insurance.
Future Generali India Life Insurance — the joint venture between Ramesh Biyani’s Future Group and Italian insurer Generali was the 16th private insurer to get clearance from IRDA. But there are nearly half-a-dozen partnerships that are waiting in the wings for a licence.
Partnerships that have been finalised include Prudential of America and the DLF group, Benelux insurer Fortis and IDBI and Dutch insurer Aegon and Religare. Public sector banks Punjab National Bank, Bank of Baroda and Canara Bank are also in the process of acquiring a life insurance for their partnerships with Principal of US, Legal & General and HSBC, respectively.
Ergo has been in search of a partner for the life insurance and non-life insurance business since October 2006. The group earlier had discussions with Bank of Baroda, However, the public sector bank decided to enter into a partnership with UK insurer Legal & General. In recent years, there has been a trend among Indian insurers to seek a premium from the foreign partner for providing them access to the Indian market.
With total premiums of nearly e 17 billion, the Ergo Insurance Group is a leading European insurer and No. 2 in the German primary insurance market. It has extensive experience in developing and managing multi-channel distribution. In May this year, Ergo had opened a representative office in Mumbai. Prior to opening the representative office, Ergo had conducted a market study to identify attractive customer and product segments, the distribution channels to be established, and the preferred operating model for ensuring efficient customer service.
Industry persons say that barriers for new players have gone up in terms of the cost of entry. There is also an acute shortage of talent, particularly actuaries. Newer entrants are finding out that the cost are significantly higher, when it comes to renting out office premises. Most of the alternate channels of distribution — banks and finance companies — have been tied down by the existing company. The only positive news for new entrants is that IRDA will reduce the minimum hours of training required for agents to 50 from 100 hours at present.
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