Non-life insurance market will continue to flourish in 2011-2015: Report

Though public sector dominates the market, improved channel penetration and innovation would help private insurers to gain a major chunk of the market share

According to the 'Non-Life Insurance in India, Key Trends and Opportunities to 2015' by Bricdata, “India's non-life insurance market will continue to flourish during 2011-2015. The competition is stiff in this arena as both private and public companies have markedly made their presence felt.”

Though public sector dominates the market, improved channel penetration and innovation would help private insurers to gain a major chunk of the market share. There are various opportunities in the non-life insurance market space, such as motor insurance, which can be tapped further as the automobile sector is growing speedily.

The proposal to increase the country's FDI limit to 49%, from 26%, will also create opportunities for innovation in terms of product offerings and distribution networks. So private non-life insurance companies should make most of this potential over the next five years.

The report adds, market continues to be dominated by public-sector insurers as all the private non-life insurers have not yet a substantial share in the total non-life insurance written premium. While public-sector insurers are expected to dominate the market over the forecast period, private non-life insurers are expected to steadily increase their market shares.

Despite the fact that the non-life insurance sector has been witnessing rapid growth during the 2006-2010 review period, it has not been able to penetrate into the rural areas where most of India's population lives, due to lack of awareness and absence of a strong distribution network.

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Thomas Cook India to distribute general insurance products

This partnership allows Thomas Cook to offer travel insurance and other general insurance products from Bajaj Allianz to its vast customer base, across the country

Thomas Cook India Ltd has entered into a tie up through its subsidiary company 'Thomas Cook Insurance Services (India) Ltd' as a corporate agent of Bajaj Allianz General Insurance Company Ltd. This partnership allows Thomas Cook to offer travel insurance and other general insurance products from Bajaj Allianz to its vast customer base, across the country.

Madhavan Menon, managing director, Thomas Cook India Ltd said, "We are proud to be associated with Bajaj Allianz, and our tie up will enable us offer a truly diverse range of customer-centric insurance products—customised and bundled travel insurance, motor insurance, health insurance and other general insurance products (both retail and corporate) to our customers countrywide. This association also gives our customers access to superior customer and claim settlement service that Bajaj Allianz is known for."

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Union KBC Small and mid-cap fund: Is it worth the risk?

Union KBC is launching a small and mid-cap fund. Such stocks are by nature very volatile and perform well when the economy is in a growth mode. Wrong timing can erode returns over the short and medium term

Union KBC has recently filed an offer document with the Securities and Exchange Board of India (SEBI) to launch an open-ended equity scheme—Union KBC Small and Mid Cap Fund. The scheme would invest 75%-100% of its assets in equity and equity-related instruments predominantly of small- and mid-sized companies. The remaining would be invested in debt and money market instruments. The performance of the scheme would be benchmarked against the BSE Mid-cap index.

Should you invest in such a scheme? Let us look at the recent past. How have similar funds performed in the past one year and three-year periods? Almost all the funds have done better than their benchmarks in both the periods. The Sensex has fallen by nearly 18% in the last one year and has given a return of 21% annually over the last three years.

But it is only during an extended market rally that small- and mid-cap stocks perform really well. The moment the market’s fortunes takes a turn for the worse, these very stocks are beaten down the most—irrespective of their fundamental strengths. Returns of funds which invest in such stocks are hence very volatile. Any signs of weakness in the markets should be enough to throw these funds out of gear.

And this has been proven in the past. In FY09-10, when the Sensex grew by 70%, from 10,000 to 17,000, such schemes with a similar investment objective performed really well. Birla Sunlife Small and Midcap Fund gave a return of 141% and DSP BlackRock Small and Midcap Fund followed closely with a return of 139%; their index—CNX Midcap—returned 126%. But in the calendar year 2008 when the Sensex crashed to half its value, in the same period the CNX Midcap index fell by 59%. Funds like Birla Sunlife Small and Midcap Fund and DSP BlackRock Small and Midcap Fund fell by 61% and 58%, respectively.

So, one has to be aware of the risks associated with such investments. If your timing is not right, your investment would get decimated. The best time to buy such schemes is when the market is at its bottom. Even though we may not be at the bottom, we are close. Of course, since one may never know when we are at the market bottom, the best way to invest would be by investing systematically in this fund. This will lower the average cost of your investment.

 

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