New Delhi, Oct 14: Life Insurance Corporation (LIC)— the country’s largest life insurer with assets of over $ 40 billion and 120 million policies in force — has decided to enter China, the world’s most populous nation.
The company is in the process of applying for the necessary approvals before making what promises to be one of its most ambitious forays abroad.
“We are yet to seek approval from the Government of India, the Chinese government, the Reserve Bank of India and the Insurance Regulatory and Development Authority (IRDA). The entire process will take at least two to three months,” LIC managing director N. C. Sharma said.
LIC sees big insurance opportunities in China but it will be up against some of the largest insurers in the world like AIG, Axa, Allianz and Sunlife Corporation.
“We have decided to go to China as it is very investor friendly. I think China’s population is under-insured so it makes good sense for us to penetrate the market,” Sharma said.
The timing is important because China became a full member of the World Trade Organisation last December and is in the process of firming up its commitments to open up its insurance sector. China allows foreign life insurers set up joint ventures in which the foreign stake has to be capped at 51 per cent against India’s current level of 26 per cent.
China will gradually lift the ban on regional control for foreign insurance companies as part of its WTO commitment. In the first year, foreign insurers are allowed to operate in Shanghai, Guangzhou, Dalian, Shenzhen and Foshan. In two years, 10 more cities will be added including Beijing, Chengdu, Chongqing, Fuzhou, Suzhou, Xiamen, Shenyang, Wuhan and Tianjin. In three years, there will be no regional limitations.
Like all other foreign insurers, LIC is salivating over the prospect that they will be allowed to offer individual (non-group) life insurance services to foreign and Chinese citizens. In the third year after WTO entry, China will allow foreign life insurance companies to provide health insurance, group insurance, and pension/annuity insurance services to Chinese and foreign citizens.
China has set three basic criteria for foreign insurers interested in setting up shop in the country. First, the investor should be a foreign insurance company that has been in business for more than 30 years in a WTO member-country. Second, the investor must have established a representative office for two consecutive years in China. Third, the total assets at the end of the previous year should be no less than $ 5 billion. LIC meets the first and third criteria; it will probably have to open the representative office before it starts operations there.
LIC, which has virtually muzzled competition from private insurers at home, has been keen on making forays abroad. It has already entered the US in association with Nationwide and has established a couple of bases in West Asia.
Recently, it opened shop in Sri Lanka in association with the Bartley Group and expects to sell its first policy in the island nation next month. It has also sold approximately 7,000 policies in Nepal where it has just completed one year of joint venture operations. LIC also intends to go Down Under and may open offices in Australia and New Zealand.