India's private life insurance companies have failed to produce a profit in the last four years

Not a single one amongst the 12 private life insurance companies, which have been in the business in India for nearly four years, has yet turned in a profit. In fact, their aggregate losses until the year ended 31 March 2004, nearly touched Rs 10bn ($229m - see Table 1). Many of them are yet to finalise their accounts for fiscal 2004-05, but not even one of them is expected to have touched the breakeven point yet.

Even so, there are several more players waiting to jump into the fray, if one takes into account the approaches made to Watson Wyatt, an insurance and financial services consulting firm. "There are at least 15 potential entrants in the life insurance business in India," said Graham Morris, director of Watson Wyatt. "A couple of them have evinced interest in getting into this business and have been talking to us for engaging our services."

Industry experts say that it takes between six and seven years for a life insurance company to break even. Nevertheless, the sheer potential of the one billion strong Indian market is very attractive.

"There is only one application from a prospective insurance company pending with us," said C S Rao, chairman of the Insurance Regulatory and Development Authority (IRDA).

"We have no information whether more players will be entering the fray. But there is no doubt that there is room for more players in the Indian insurance industry." When asked if the IRDA would consider revising any of the entry norms, based on the experience of dealing with the existing players in the industry, Mr Rao said, "There is no need to revise any of the entry norms or barriers for the prospective entrants."

It was recently reported that the Reliance group had not yet used the licence it had secured three years ago for its proposed life insurance venture.

Incidentally, Birla Sun Life Insurance has ended fiscal 2004-05 with a 70% increase in premium income, to Rs 9.16bn, and plans to increase this to Rs 15bn by the end of the current fiscal. The annualised premium grew by 32% to Rs 6.27bn, in comparison with Rs 4.61bn for 2003-04. The company has issued close to 200,000 policies this year, taking the total number of policies to 377,240, and the total sum assured to Rs 227.15bn. The result gives Birla Sun Life a market share of 3.3%, and catapults it into the No 2 position among private life insurers in India.