Jio Financial Services To Enter Insurance Space? Here's What CLSA Says
JFS can capitalise on its ability to provide competitive pricing to improve protection penetration, says CLSA.
CLSA is looking forward to observing the impact of Jio Financial Services Ltd.'s expected insurance foray on pricing in the industry, according to its recent report.
"Insurance distribution may present an opportunity as it remains a fragmented segment with the presence of few large players only," the brokerage said in a note on Monday.
JFS plans to apply for life and non-life insurance licenses, CLSA said, citing media reports. "The company has set aside a capital base of Rs 1,000 crore each for the businesses," it said.
Hiring for both companies has already begun with a few former public-sector-undertaking officers joining JFS, the note said, citing another media report.
The Indian insurance market consists of 55 players, with 26 life insurance providers and 31 general insurers, including five standalone health insurance providers.
Total premiums written by Indian life insurers stood at Rs 8.14 lakh crore, while those written by general insurers was at Rs 2.65 lakh crore in FY23.
Life Insurance Opportunity
A key focus area for JFS can be to capitalise on its ability to raise awareness for insurance as an investment product in wider geographies, along with providing competitive pricing to improve protection penetration, CLSA said.
The brokerage estimated that a net worth of Rs 1,000 crore could imply a sum assured of Rs 1.2–1.8 lakh crore, assuming 2.5–1.5 times solvency ratios.
SBI Life Insurance Co. has a sum assured of Rs 1.8 lakh crore as of March 2023, according to the note.
Non-Life Insurance Opportunity
The general insurance industry is made up of unique sub-sectors, each with a distinct business model, CLSA said.
Motor is a highly competitive segment and has been a low-hanging fruit or an entry point for many new general insurers. Health insurance is a compounding growth story with competition incrementally rising, but is an intensive business that takes time to scale, according to the note. "The commercial segment is a reinsurer-dependent large-ticket segment that is driven by corporate relationships."
JFS' entry point can be to target corporate-relationship-driven segments, such as group health and commercial insurance, CLSA said.
The brokerage estimated a gross premium size of about Rs 2,500–Rs 3,500 crore based on a net worth of Rs 1,000 crore and assuming solvency ratios of 2.2–1.5 times. This compares to approximately a 10th of ICICI Lombard's premiums during FY23.
Distribution
Jio Retail Insurance Broking, erstwhile Reliance Retail Insurance Broking that was established in 2006, is one of the over 550 insurance brokers in India, the brokerage said. The company reported a net profit of Rs 16 crore for the fiscal ending March 2023, with its net worth at Rs 3.3 crore for the period.
CLSA estimated that the company sold over Rs 300 crore of premiums versus Rs 7,000 crore in premiums sold by PB Fintech in FY22, assuming a normalised take rate.
The brokerage said it did not have any details on plans regarding its broking business, it expects the company's existing partnerships with 17 insurers could enable the business to be scaled up faster under JFS.
