State Bank’s non-life entry to hit New India hardNovember 28th, 2008 - 12:41 pm ICT by IANS
Chennai, Nov 28 (IANS) Once the state-owned State Bank of India (SBI), India’s largest lender, enters the non-life general insurance business following its recent tie-up with Insurance Australia Group Ltd. (IAG), the country’s premier non-life insurer New India Assurance will start losing Rs.2 billion premium income annually.As a bancassurance partner, SBI currently contributes around Rs.2 billion as premium income every year to New India’s revenues, a New India official told IANS on condition of anonymity.
Also, with the State Bank of Saurashtra’s merger with SBI getting the central cabinet’s approval in July this year, the Mumbai-based New India had hoped to further increase its premium income from this channel.
SBI, however, tied up with IAG this month to enter the non-life general insurance business. IAG is a general insurance group with operations in Australia, New Zealand, the UK and Asia.
SBI is the largest commercial bank in India, having over 100 million customers, 11,000 branches across the country, and access to an additional 46 million customers and 4,500 branches when including its associate banks.
According to the deal signed between SBI and IAG, SBI will hold 74 percent stake in the proposed general insurance company and IAG the balance.
The bulk of the business contributed by SBI to New India is the profitable fire insurance business that SBI generates by insuring the properties against which it offers home loans.
“All bancassurance businesses are profitable. So is the business from SBI,” the New India official said.
The SBI-New India partnership will, however, continue well after next March as the proposed tie-up between SBI and IAG has to get a licence from the Insurance Regulatory and Development Authority (IRDA).
The New India official said many big borrowers of SBI take their insurance policies on their own and are not bound to the lender on this issue.
The other state-owned non-life insurer to be affected by SBI’s new partnership will be the Kolkata-based National Insurance Company.
National Insurance has signed bancassurance partnership with two of SBI’s associate banks - State Bank of Bikaner and Jaipur and State Bank of Mysore - and also offers custom designed health insurance and home insurance products for SBI’s customers.
Industry officials expect SBI’s associate banks to become bancassurance partners for SBI’s general insurance company once it starts operations.
At a time when many private life insurers are posting huge losses despite being in business for more than seven years, SBI has a profitable life insurance joint venture, SBI Life Insurance, partnering with Cardiff, France.
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