India’s state-run lenders Bank of Baroda (BoB) and Andhra Bank have said their joint venture with UK-based Legal and General Group PLC (L&G) would start operations next month with four products following the final R3 approval from the Insurance Regulatory and Development Authority (IRDA).
BoB will hold 44% and Andhra Bank and L&G will have 30% and 26% share respectively in the joint venture, IndiaFirst Life Insurance, and the entity will have a paid-up capital of Rs200 crore, said a company official.
“There is vast potential in the semi-urban and rural areas that is yet to be tapped. Through this venture, we aim to take the benefits of life insurance to the masses. As always, it will be our endeavour to place the interest of our customers first,” said MD Mallya, chairman and managing director, BoB.
However, the joint venture would really have to dig deep to survive in the insurance industry, where many of the leading players continue to sustain losses year after year even after a decade of operations.
Both BoB and Andhra Bank have tie-ups with other Indian insurance companies, but said they will end it by next month. Mr Mallya said BoB had already terminated its arrangements with HDFC Standard Life Insurance, effective from 1st November, while RS Reddy, chairman and managing director, Andhra Bank said, the lender is in the process of ending its relationship with Life Insurance Corporation of India and would do so before the launch of IndiaFirst.
When Moneylife asked Dr P Nandagopal, the chief executive of IndiaFirst on how the company proposed to create value in such a scenario, he said, “Our main advantage would be the low operational costs involved in providing our value-for-money products, which would ensure that the break-even would be faster.”
The insurance joint venture would initially operate through the bancassurance channel, leveraging on the existing customer base of over 50 million customers of the two promoter banks spread across 4,500 branches in the country. IndiaFirst plans to offer four new products covering specific plans for savings, retirement, education and annuity. –Sanket Dhanorkar[email protected]