The insurance regulator has come out against the idea of allowing any new insurance company in the country considering the present 'saturation and chaotic state' of the insurance sector, officials said.
Insurance Development and Regulatory Authority (IDRA) conveyed its opinion to the finance ministry on April 05, as the ministry sought its opinion about the idea.
"Some 78 registered insurance companies, including 32 life insurers, are now running their business in the country, home to 160 million people. Even there is not so many insurance companies in a populous country like India," IDRA chairman Md Shafiqur Rahman Patwary said in a letter to the ministry.
"The number of existing insurance companies is much higher than the country's market size. Besides, the government issued fresh licences to 14 life insurance companies in 2013 and 2014. Of them, only one or two companies are performing at the expected level," he mentioned.
On the other hand, negative fund of other insurance companies, non-payment of clients' premium and embezzlement of money by the agents indicate a volatile situation of the sector, he said, adding that operational activities of the existing insurance companies are being hampered seriously due to lack of skilled manpower.
The private sector sponsors are showing interest in filing applications to set up new insurance companies, although IDRA has not officially invited any such applications, according to a source.
A number of applications have been submitted to the finance ministry seeking licences for new insurance companies and the number of applications continues to rise, said the source.
Many influential persons are on the list of such applicants. Most of them are trying to get permission to set up new insurance companies, the source added.
"The authorities concerned have already given permission to set up 14 insurance companies in 2013 and 2014. Now we don't see any valid reasons for allowing new companies in the country. We know about the possible impact of new insurance company on the financial market," said a senior official of IDRA.
The regulator has recently taken a firm decision not to give permission for setting up of new insurance companies now, considering the economy and the size of its money market, another IDRA source said, adding that the country's overall insurance sector is in the doldrums.
"We do not want to issue licences to any new insurance company for the time being. We think it is not right time to allow new companies," the IDRA chairman told the FE.
The insurance companies which were allowed to run business three years ago are not doing well, he added.
There are 78 insurance companies in the country. Of them, 46 are non-life insurance companies and 32 life insurers. Of the total, only two are state-run insurers, according to IDRA.
