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| SBI General's imminent debut ruffles existing players |
| Namrata Acharya / Kolkata Mar 25, 2010, 00:21 IST |
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Likely to kick off operations in end-March or early April.
Public sector insurance players are likely to lose their dominant market share soon, as the country’s largest lender, State bank of India (SBI) gets ready to make a splash in the general insurance space through a joint venture in the next few days.
SBI General Insurance Co, a 74:26 joint venture between SBI and Insurance Australia Group (IAG), is expected to start operations by the end of the March or early next month, according to a source close to the development.
At present, four public sector general insurance companies — New India Assurance, National Insurance, United India Insurance and Oriental Insurance — collectively enjoy about 60 per cent market share.
The biggest setback will be for New India Assurance, as SBI is its bancassurance partner. Out of the Rs 400-crore annual premium that New India earned from the bancassurance channel, SBI accounted for nearly half, or Rs 200 crore.
“We have plans to recover from the loss. We are also in talks with three-four other banks for a partnership,” said a New India Assurance executive. The company enjoys around 17 per cent share of the general insurance market.
“It (SBI) is a big player, has a huge reach through a large number of branches and has financial strength. It can create a dent in the market. SBI can reach almost all major clients. Its entry will affect us because New India has a distribution tie-up with SBI,” M Ramadoss, chairman and managing director, New India Assurance, had said earlier.
“There might be some impact on the market share of public sector insurance companies, once SBI General Insurance comes into the market. But, we will have to see what strategy they adopt,” said a National Insurance spokesperson.
Also, marginal repricing of some products could not be ruled out in the short term, even though premium for fire and engineering insurance had fallen after de-tariffing, said insurance company officials.
“This year, the market might have been erratic due to new entrants, but it should be more disciplined by next year,” said an Oriental Insurance spokesperson.
SBI General Insurance has already filed for products across segments.
“The company has made a lot of progress. It will have full range of products,” said RR Bele, managing director and chief executive officer, SBI General Insurance. SBI has invested Rs 111 crore for its 74 per cent equity, while IAG has pumped in about in Rs 542.10 crore (including about Rs 500 crore premium) for its 26 per cent stake.
By timing its foray now, SBI would eye corporate clients, as that was the time when most of them renew policies, the source said. The company is also hoping to leverage SBI’s 10,000-plus branch network and borrowers, mostly in retail and small & medium enterprises segments.
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