Foreign Direct Investment (FDI)
has the potential to put any country’s economy in high growth
orbit. It has provided a boost to incomes and had an all round
beneficial impact on a country’s gross domestic product
(GDP). A hike in amount of FDI in other markets has brought a
dramatic change in the insurance industry as well.
Talking about Indian insurance industry, it offers great potential
with life insurance penetration being 3.3% of the GDP. At present,
only 8% of the total population is availing benefits of insurance
policies, while the total insurable population is estimated to
be 240 million and the figure may increase in approaching time.
However, India has nowadays been considered as one of the leading
choices of global investors.
Most countries have liberalized their insurance industries and
relaxed the norms for FDI. This has undoubtedly paved the way
for improvements in premium incomes. Let’s look at the scenario
in Poland. For over 40 years, PZU (the state insurance company)
reign over domestic market. Polish insurance industry has been
liberalized in the year 1990 and today, there are near about 69
insurance companies in Poland. Of the total, 35 are insurers licensed
to execute life insurance business. The penetration has been shot
up to 500% and total industry premium now stands at $3.5 billion.
Surprisingly, of the 10 leading life insurance companies, nine
are known to be foreign owned leading insurers. Likewise, China
also has something interesting to add to the trend. Also known
to be one of the world’s oldest civilizations, China has
been holding the position of largest recipient of FDI in the developing
world since 1995, receiving $40.8 billion in 2000.
When the insurance market re-established as a part of the post
1979 financial reforms, insurance premiums were estimated to b
$77.4 million. Slowly, the China insurance market caught up the
pace and grew to an average rate of 26% reaching to $19.2 billion
by the year 2000. The country made 249 fold increases which is
unique in itself.
The approval of re-entry of 16 extra leading foreign insurance
companies proved to be bliss for China’s insurance industry.
In continuance with economic development, China has granted the
permission to foreign ownership of life insurance joint ventures
to be up to 50%.
