Past developments in this area and recent judgments of the Mumbai National Company Law Tribunal (NCLT) allowed to merge Exide Life Insurance with HDFC Life This is an indication that institutions without the necessary expertise may leave the sector.
To equip itself with the complexities of mergers and acquisitions, the Insurance Regulatory and Development Authority of India (IRDAI) has started looking for consultants who can evaluate state-owned and private sector insurance companies and train their executives on valuation methodology and procedures.
Market players and analysts believe that the sector has great growth potential and will have new entrants. insurance industry And also merger and acquisition (M&A) deals.
“This sector, like others, has seen some mergers and acquisitions in the past and will continue to see them emerge and new opportunities emerge in the future.
“Players with underwriting practices, strong financials and right management practices will continue to grow for a long time,” said Deputy Managing Director Anand Pejawar. State Bank Of India general Insurance.
Pejawar further said that India’s insurance landscape is vast and there is ample scope and ample volume for players to co-exist. Given the scope for growth in this sector, both large and niche players can continue to operate in the market.
At present there are 24 life insurance companies and 31 non-life or general insurance firms, including specialty players such as Agriculture Insurance Company of India Limited and ECGC Limited.
There has been a consolidation in the insurance sector in recent times — merger of Bharti AXA General Insurance ICICI Lombard General insurance was completed in September 2021 and HDFC ERGO acquired Apollo Munich Health Insurance Company in 2020. In 2016, HDFC ERGO General Insurance acquired 49 per cent stake in L&T General Insurance from L&T.
“…Given the benefits from economies of scale, in all likelihood, the top 10 players in life and general will command a 90 per cent or more profit pool”, said Avinash Singh, analyst at Emkay Global Financial Services.
Experts were of the view that the main requirement in both life and general insurance is to bring in more capital and invest capital in developing the business.
Kapil Mehta said, “M&A, while useful in building scale, does not bring much capital into the business. Hence, I think there is an opportunity for many more insurers to enter, which is due to the consolidation inherent in M&A. opposite.” Co-Founder, Secure Now.
Mehta said while economies of scale are important, this can also be achieved through business growth rather than just M&A.
“There will be new entrants and there will be M&A – it is a natural process,” said Pawanjit Singh Dhingra, joint managing director, Prudent Insurance Brokers.
Insurance companies are also collaborating with insurance companies to provide innovative solutions and provide a unified experience across the customer journey from delivery, service to claims.
Shailja Lal, Partner, Shardul Amarchand Mangaldas & Co, said the insurance sector is highly capital intensive and investment activity in the insurance sector will continue, especially with respect to insurance companies led by private equity funds.
“In recent times, many promoters of insurance companies have completely or partially abandoned their insurance ventures to focus on their core business, including the recent exit from the company. Exide Promoter of life insurance from its insurance business, and later merged with Exide Life HDFC Life Insurance Which recently got clearance from NCLT,” Lal said.
Insurance penetration in India increased from 3.76 per cent in 2019-20 to 4.20 per cent in 2020-21, registering a growth of 11.70 per cent.
Last year, the government had amended the Insurance Act to allow foreign holding in insurance companies to be increased from 49 per cent to 74 per cent.
In addition, Parliament passed the General Insurance Business (Nationalisation) Amendment Bill, 2021, allowing the central government to hold less than 51 per cent of the equity capital in a specified insurer, paving the way for privatization.
According to a study, India is likely to become the world’s sixth largest insurance market in the next 10 years, supported by regulatory push and rapid economic expansion.