Kumarmangalam Birla's comments on issues relating to the insurance sector

Since the approval of the Insurance Regulatory Authority by the Government of India, big Indian houses have begun making their foray into the insurance sector. Kumarmangalam Birla, Chairman, Aditya Birla Group, formally announced his company's entry into the insurance sector, with The Birla Sun Life Insurance Company - a joint venture between the Aditya Birla Group and Sun Life Financial Services, Canada.

While announcing the venture, Kumarmangalam Birla, commented on some vital issues relating to the insurance sector and the new launched joint venture of the Birla Group.

On the present insurance policy of the Government...
After the Indian Cabinet approved the Insurance Regulatory Authority (IRA) Bill, on March 16, 1999, which was designed to liberalise this particular sector, we are witnessing that lot of new players are coming in the insurance market. If foreign insurers enter the market, competition will ensue. The IRA bill allowed for upto 26 percent foreign equity participation in the insurance sector. In Birla Sun Life, Indian Rayon has the major stake of 69 percent, 26 percent share with Sun Life Financials and the rest five percent with Birla Global Finance Limited.

Products and infrastructure of Birla Sun Life...
We have already started putting up the infrastructural facilities in various places, Mumbai and Delhi to begin with, inorder to provide insurance at the individual as well as group level along with pension products and services to meet Life insurance need of people. Birla Sun Life follows a conservative long term approach and all its products are customised. There is a greater awareness of planning for old age and the need for pensions and annuities, and realising this we ahve included policies as one of our products. We are expecting a tremendous growth in the sector, and as far as the company is concerned. If our assumptions and strategies goes the right way, then we might see Birla Sun Life as one of the major players in the Insurance sector within a time span of 5- 6 years.

About the Indian Market...
The very important transition that has taken place in India is the emergence of the middle class people, as a very strong and influencial section as far as market boom and recessions are concerned. India is still a virgin market, there is very limited coverage - Life insurance funds account for only 10 percent of gross household saving in financial assets. Only 22 percent of the insurable population has been tapped. So India’s insurance market is likely to expand and there are excellent prospects for profitable operations by new market entrants. Right now it is difficult to speculate about market dimensions (domestic versus foreign company shares) assuming that market liberalisation occurs in the future.

Competitors and expansion strategies of the company...
The major competition we will face is from Life Insurance Corporation, which is one of the oldest companies in India. The LIC has a network of 7 zones, 100 divisions and over 2,000 branches. Our group's extensive presence in India, as well as our network of employees, shareholders and distributors will be of great advantage, and will ensure benefits for our insurance business.

Damages faced by the Birla Group due to earthquake that hit the country on 26 January 2001...
Not much damage has been incurred by the Birla Group of industries on account of the Gujarat quake. We are still in the process of assessing the damage caused by the tremors. Things will be clear once the market stabilises, which infact might take some time.

On the forthcoming union budget...
We are not expecting much from the coming budget, at least not at the time when the country is hit by a major natural calamity. Few favourable insurance regulations might come across after the budget. Now, its to be seen, how the finance ministry, rework on the budget in post earthquake period, in order to revive the country from the recently faced economic shocks.

By : Sharmistha Chakraborty

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