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Topic : life insurance
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Should India Bulls enter into Life Insurance business?

Created by : SHARATH CHANDAR REDDY, Business Development Manager - Insurance, I T C Ltd  | 12 23 2009 07:40:52 +0000
Industry : InsuranceFunctional Area : Business Models(Strategy & Execution)
Keywords : insurance indiabulls jv
Activity:  785 views;  last activity : 07 06 2010 20:18:09 +0000

Indiabulls calls off life insurance venture with Societe Generale

Indiabulls Financial Services has terminated its life insurance joint venture with Societe Generale, the company said in a notice to the Bombay Stock Exchange, on Monday.

The two companies had entered into a joint venture in April 2008. The company had received approval from the Reserve Bank of India to hold up to 74 per cent in its life insurance venture.

The life insurance company has already received the R1 approval from Insurance Regulatory and Development Authority.

The joint venture was mutually called-off due to disagreement over the capital to be raised for the life insurance company.

According to Mr Gagan Banga, Chief Executive Officer, Indiabulls Financial Services, a new partner will be announced in about two weeks. If the deal gets done in the first half of January, then the insurance company will be operational by April.

In the situation where India is flooded with so many Life insurance companies, should India Bulls enter into Life Insurance business???

  
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My argument would be a definite NO, for the following reasons:

1. In India, the Life Insurance business basically needs Trust of the public to become successful. With the recent economic crisis and the stories like AIG, it is going to become a herculean task for the not so branded private companies to create trust in public. Public may still have trust in companies like companies like Tata, Birla, Reliance, Bajaj, HDFC, ICICI or the PSU banking companies.

2. Already India Bulls has cancelled its JV with Societe General. It becomes more difficult for a company like India Bulls to create trust in public with another partner.

3. Competetion is intense. Existing Life Insurers are struggling miserbaly.

4. With so many regulatory changes in favour of policy holders, it becomes new entrants (particularly for not so famous companies) to establish, continue and consolidate.
By SHARATH CHANDAR REDDY, Business Development Manager - Insurance, I T C Ltd  | 12 23 2009 07:40:52 +0000
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