After Kotak Mahindra Bank acquired ING Vysya Bank in an all-share deal last week, it announced it entry into General insurance business.
On Tuesday, the fourth largest private bank (post merger with ING Vysya) received approval from RBI to form a 100% subsidiary to enter general insurance industry, which is currently growing at a Rs 77,000 crore premium per annum, said Gaurang Shah, President - Asset Management, Insurance and International Business at Kotak Bank.
The bank had earlier received an in-principle approval from Insurance Regulatory and Development Authority (IRDA) for incorporation of the General Insurance firm. The company would now be required to apply and complete the registration process with IRDA to act as a General Insurance Company.
"We are likely to complete all our approval processes by first quarter of FY16 and will start operations by the second quarter (2015-16)," Shah said.
Mahesh Balasubramanium, current Executive Vice President and Co-Head Branch Banking, has been named the Chief Executive Officer of the new venture, which is started with an initial capital of Rs 100 crore. The bank is likely to hire about 250-300 people for the business.
The bank already has a tie up with Tata AIG General Insurance Company to sell and distribute its products. According to Shah, this agreement will come to an end once the general insurance arm starts its operations next fiscal.
Kotak also has a Life insurance unit called Kotak Mahindra Old Mutual Life Insurance Ltd, a joint venture between Kotak Mahindra Bank and South Africa-based Old Mutual Public Ltd.
Competing with over 25 general insurance players in the market, the general insurance unit will focus on Motor, Health, Fire, Marine and other commercial lines business and may look at travel insurance too going forward.
However, with initial focus on motor and health insurance, Kotak aims to grab about 0.5 per cent of the market share with a business of Rs 800-900 crore in the next 5 years. The industry is expected to grow at a CAGR of 15 per cent to grow at Rs 1.80 lakh crore by 2020 (from Rs 77,000 crore), Balasubramanium said.
With Kotak Mahindra Group’s distribution network, growing brand equity and consumer franchise, he added, “We believe we will be able to leverage synergies and add significant value to the general insurance business. Being a new entrant, we will have opportunities to embrace new technologies and developments in the digital world to provide innovative products and solutions which will deliver superior customer experience.”