Risk Focus

Towards the future: Insurance companies getting listed & fresh grounds opening with new opportunities & challenges

General Insurance industry has traveled a long way in India. The journey has been interesting and enlightening. The industry has survived many ups & downs and has prospered by taking on new challenges. Recently one of the challenges was transformed into a milestone. Five general insurance companies including ICICI Lombard announced the decision of getting listed in the stock market. The important landmark in this event is that ICICI Lombard became the first company in non-life insurance segment to be listed. By doing this history has been created.

India's honorable Finance Minister Mr. Arun Jaitley released a statement welcoming this move, earlier this year. This was after The Cabinet Committee on Economic Affairs' shown green signal after intense scrutiny.

By taking the Initial Public Offering (IPO) route, the companies expect to achieve benefits of listing as well as enriching their brand, delivering value to the shareholders. Market analysts feel that attractively priced IPOs would receive a solid response from investors as chances of getting listed with higher premiums are more. According to experts, proactive regulatory environment coupled with a general uplift in investors' sentiment has given a positive boost to the domestic IPO market.

Getting listed is not only beneficial to the companies but also to the clients, customers, shareholders, and stakeholders. The listing helps investors to take part in the wealth-creation process. At present, there is a standard set of public disclosures that all companies follow every year. With a company getting listed, stakeholders will see quarterly reporting of the figures in greater detail and with higher transparency in all. Grievance redressal will be faster. All this really adds to long-term trustworthiness and credibility.

The company manages its portfolio as a whole. However, with greater scrutiny from investors, the companies will need to keep individual lines of business profitable too. The premiums will be optimized if more and more people get covered. The law of large numbers works in insurance too. It is also possible that the companies would put in efforts to make every single line of business profitable on its own. For instance, products in group health and fire categories are currently subsidized by other lines of business like private motor car insurance, liability insurance, and home insurance, which are very profitable lines.

The Insurance Regulatory and Development Authority (IRDAI), is not planning to make a compulsory listing of insurance companies on the stock exchanges for the time being. IRDA has followed a very liberal and progressive attitude in this case. The insurance regulator is also in process of coming out with outsourcing and process regulations very soon.

Speaking at the annual insurance summit organized by the Confederation of Indian Industry (CII) Mr. Vijayan, Chairman of IRDAI, said that while the gross domestic product (GDP) growth is 7 percent in India, the growth of the insurance industry is at 17 percent. GDP growth, demographic environment, and insurance products developments are main factors for the growth of the insurance industry. Experts proclaim current move of getting listed is expected.

Consumers, investors, government and the companies all appear to be on the winning side. With optimistic market scenario and favorable government policies the future of the business seems very bright.