The Unit Trust of India (UTI), which is readying for a major foray into the insurance sector, plans to launch a separate subsidiary for entering the health insurance sector.
The decision follows the Union budget proposals for 1997-98 allowing entry of select Indian companies and companies with majority Indian ownership into the health insurance sector.
On the other hand, the Life Insurance Corporation and General Insurance Corporation will continue to enjoy a monopoly in life insurance business and non-life and non-health insurance businesses, respectively.
The UTI may also continue to buy risk cover at competitive rates from the new players that are likely to flood the health insurance sector, a UTI official said yesterday.
However, the mutual fund giant does not have any plans to forge joint ventures with foreign companies for its present foray, sources said.
UTI is currently awaiting the announcement of the Insurance Regulatory Authority (IRA) guidelines for its entry into the health insurance sector after which the trust may launch specific health-insurance products.
Accordingly, there may be revision in its medical benefit scheme Senior Citizens' Unit Plan (SCUP), sources said.
UTI currently has entered into a collaborative arrangement with New India Assurance Co Ltd, a GIC subsidiary, for an exclusive medical insurance cover to SCUP unit holders.
According to analysts, UTI's entry into health insurance sector will flare up competition for the other state monopoly GIC.
The Trust has ruled out any adverse impact on its unitholder base following the Union budget proposal on abolition of double taxation on dividends. The move relieving shareholders from paying taxes on dividend income does not extend to dividend income earned from mutual funds. However, UTI sources feel there will be no siphoning off of investors from its mutual fund schemes as the return on investments in its schemes are higher than the dividend yields of corporates.
UTI officials lauded the Union budget for 1997-98 as consistent with liberalisation. "The budget was a shift from the earlier planned model of budgeting but it was a definitely a right move to energise the economy through private growth," trust sources said.
UTI, with an investible base of Rs 56,000 crore, recently received approval for its interim restructuring plans from the Securities & Exchange Board of India.
The mutual fund major has decided to float three asset management companies AMCs to manage its vast portfolio of 69 mutual fund schemes.
Under the recast plan the AMCs will manage a balanced portfolio of different growth and income schemes while one AMC will look after the flagship scheme US-64 with a corpus of Rs 15,000 crore.
