State-run Bank of India said on Monday it would form a joint venture with Japan's Dai Ichi Mutual Life Insurance Co, joining many others vying for India's fast growing but underserved life insurance market.
Rising disposable incomes and greater consciousness for health cover are boosting demand for insurance, with Standard & Poor's forecasting India's life insurance market to expand by a fifth in 2006.
The rating agency said life insurance penetration rate was 2.35 percent of gross domestic product, among the lowest in Asia, offering scope for faster growth when a limit on foreign direct investments in the sector is increased to 49 percent from 26. However, the ruling Congress government has been dragging its feet to ease the limit because of opposition from its communist allies.
Last month, Belgian-Dutch financial services group Fortis agreed to accept a 26 percent stake in a life insurance venture with India's Federal Bank and IDBI Ltd.
Dai Ichi is expected to hold 26 percent in the venture with Bank of India. Another Indian firm will also have a stake in the business, but its name was not immediately disclosed.
India currently has 13 private sector life insurance companies with global giants such as UK's Aviva Plc, Sun Life of Canada and New York Life of the United States. State-owned Life Insurance Corp dominates the industry with about 70 percent market share, while private sector firms have been growing aggressively in the big cities such as Mumbai and New Delhi.
India's top two banks State Bank of India, ICICI Bank already have life insurance joint ventures. State-run Punjab National Bank is expected to float a venture soon with Principal Financial group of the United States.