Foreign insurers will transfer monies abroad, thus leading to a flight of foreign exchange.
There are stringent checks and balances imposed by the FIPB and the Reserve Bank of India on forex outflows. Since this is being successfully implemented in all sectors where FDI has been invited, insurance can be no exception, especially when the repatriation of premiums is likely to be forbidden. Repatriation of dividends cannot logically be banned, since they constitute distributable profits-what shareholders would be paid here would be the same as would be repatriated abroad.

In fact, a point worth noting is that as these would be calculated in rupee terms, the repatriated dividends would actually be lower than those distributed here, when calculated in dollar terms. These dividends are also not expected to roll in before the next 6-7 years, anyway, in insurance projects which typically have long gestation periods. Many foreign insurers would need to plough back these distributable profits into the business even then. Even with regard to re-insurance, the India public sector companies have a retention level of 84.12 per cent, which is higher than most other SE Asian countries like Thailand (82.47 per cent), Indonesia (77.25 per cent), Taiwan (64.15 per cent) and Malaysia (72.30 per cent). S Korea stands higher at 95.41 per cent.

Foreign companies would employ very few staff, as a result of which GIC and LIC would have to shed staff to remain competitive.
The industry today provides employment to 270,000 people. As markets open up and newer forms of businesses emerge (a virtual explosion is expected in terms of intermediaries as direct marketing is a very important tool in insurance), the rate of employment will go up. In UK, which was one of the markets that opened up early, the sector supports 600,000 jobs.

In Thailand, Taiwan and Malaysia, the total number of people employed in insurance went up from 22305, 10125 and 14520 in 1992 to 33552,12888 and 19480, respectively. In any case, exit policies have not been implemented in the banking sector seven years after liberalisation. Chairmen of public sector insurance companies have openly gone on record as saying that there would be no job cuts.

Foreign insurers would gain large marketshares and dominate over pubic sector companies.
Foreign companies have never dominated over any public sector company in any country, even in situations 100 per cent equity holding has been permitted. This was the case in pre-nationalisation India, as well.

Even in developed markets like Japan, foreign insurers hold barely 10 per cent, while in Indonesia and Malaysia it is close to 20 per cent many years after these countries opened up. In China, it is the three public sector companies which hold over 85 per cent of the market share 12 years after liberalisation.

Since domestic companies are doing well, and all the basic necessary products are available in the market, the entry of foreign insurers will be a redundancy.
Asian premium per capita is $267.30 with a penetration of 10.12 per cent. As against that, India's position of a density of $6.40 and penetration of 2.01 per cent compares poorly against this, and shows that the potential has not been tapped properly, even in the context of improved standards of living.

With single child families on the increase and human longevity higher, newer life products have to hit the market, awareness about their need has to be spread, and the products marketed and serviced better. All this can only come through competition.

Foreign insurers would ignore the social sector and concentrate only on the profitable lines of business.
In India, where banks still have to conform to priority sector norms, foreign insurance companies can hardly expect social sector requirements to be waived.

However, they may be slightly different in order to be more meaningful (especially when over 52 per cent of LIC's business is already in the rural areas). In other countries, foreign insurers have brought in innovative insurance schemes for farming, infrastructure, disaster mitigation, education, road safety and health initiatives.