International Business Case Study

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International Business Case Study
Sun Life Financial and Indian Economic Surge

How is the Insurance market in India changing? Why is India an attractive market for investment?

The insurance market in India has undergone significant changes over the past few years

The Insurance Act of 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business.

Life insurance in India was completely nationalized on January 19, 1956, through the Life Insurance Corporation Act. All 245 insurance companies operating then in the country were merged into one entity, the Life Insurance Corporation of India

1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the
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Liberalization on the Insurance sectors allowed foreign players to enter the market with Indian partners. India also offered immense possibilities to foreign Insurers since it is the world 's most populous country having over a billion people.

Indian population comprised of 1.05 billion, savings rate being 26 percent and middle class population of 300 million, out of which only 110 million were insured. Insurance density in country, based on per capita premium was just $5 in life insurance segment and $2 in general segment. The share of life insurance premium to GDP was 1.29 percent.

Sun Life Financials studied the Indian scenario and saw great untapped potential in Indian Insurance market, economic stability and growth prospects and hence decided to enter Indian Market.

What was the entry mode in India for Sun Financials and why?

Sun Financials entered the Indian market through a joint venture with the Aditya Birla Group. The joint venture was called Birla Sun Life Insurance Company. The structure and equity pattern was Indian Rayon and Birla Global Finance Ltd having a stake of 69 percent and 5 percent respectively while Sun Life Financial held 26 percent.

Sun Life Financials holding was limited to 26 percent because the Indian government set up the Insurance Regulatory Development Authority (“IRDA”) in
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