Reliance Industries’ Expansion Into Insurance And AMC Sectors Sparks Market Speculation; JFSL Could Prove To Be A Game Changer!

Reliance Industries Limited, RIL is upping its game as it now plans to enter the LIC-dominated insurance and asset management businesses through Jio Financial Services Limited, JFSL.
Although the details of the same are still to be revealed and may come out by next month, the news nevertheless has already shaken the market.

RIL is planning its foray into insurance (both life and non-life) and asset management and, in all likelihood, as has been the trend, will lead to disruptions in the market and existing players.

The entry of Reliance Industries into the insurance sector is likely to create market ripples for existing businesses. With its vast resources and strong distribution network, Reliance Industries is expected to give tough competition to existing players in the market.

The company’s entry into the insurance sector will likely result in increased competition and pressure on existing companies to innovate and offer more customer-centric products and services. This could lead to a shake-up in the market, with some companies struggling to keep up with the changing dynamics of the industry.

Moreover, Reliance Industries’ entry into the insurance sector could also lead to consolidation in the market as smaller players may find it difficult to compete with the company’s scale and resources. This could result in mergers and acquisitions, with bigger players acquiring smaller players to expand their market share.

The Reliance Advantage!
RIL has a significant advantage, the biggest that it already has access to a large customer base through Reliance Retail, Reliance Jio, and other subsidiaries; thus, it could utilize the same and easily promote its insurance products through them.
The entry of Reliance Industries into the insurance sector could also result in the introduction of new and innovative insurance products and services that cater to customers’ changing needs.

Will RIL Render LIC Obsolete?
Life Insurance Corporation of India (LIC) is the largest insurance company in India, with a market share of around 70%. Established in 1956, LIC has been a significant contributor to the development of the insurance sector in India. The company has, over the years, earned a reputation for its trustworthiness, financial stability, and reliable customer service.

With the increasing digitization of the Indian economy, newer insurance companies are leveraging technology to provide more efficient and customer-friendly services. These companies are using digital methods to offer innovative insurance products, personalized customer experiences, and simplified claims processes.

One thing is for sure JFSL is likely to embrace new technology as it debuts the segment. To stand apart, it may adopt a way of doing business that is entirely different from that of the life insurance behemoth, LIC.

For instance, new insurance companies are leveraging digital platforms to make it easier for customers to purchase and manage insurance policies. They are using online channels such as websites and mobile apps to provide customers with the ability to compare policies, calculate premiums, and purchase insurance policies in a matter of minutes.

LIC is heavily dependent on its 14 L strong agent force that garners business, a traditional way of doing business; RIL, on the other hand, may opt for complete digitalization of its distribution platform, thus offering a wider reach and minimal costs.

Life insurance is a highly capital-intensive business. If a significant chunk of your business comes from the agency force, then it means that you will end up paying a hefty sum to them in the form of commissions.

Newer insurance companies are also using digital methods to make the claims process more streamlined and efficient. They are using technologies such as blockchain to create secure and transparent claims processes that minimize the time and effort required to file claims and receive payouts.

In the insurance industry, digital insurance can bring down distribution costs; thus, if the company has a better distribution network and is an insurance manufacturer, it can undoubtedly address mass products that could be pretty disruptive; here, JFSL will make a difference with its focus on digital distribution.

The Insurance Regulatory and Development Authority of India (Irdai) has said agents can be better paid off under its newly introduced EoM guidelines. Since April 1, 2023, Idai has announced removing segmental limits on commissions for life, general, and health insurers. The move is expected to significantly impact how insurance companies operate and compete in the market.

In October last year, RIL unveiled its plan to demerge its financial services business and list it separately on the stock exchanges under JFSL in a move to tap the growing demand for New Age financial services for retail and small-business customers. Under this transaction, shareholders of RIL will receive one equity share of JFSL for one share.

JFSL has already appointed KV Kamath (former CEO of ICICI Bank) as its chairman and Hitesh Sethia as the CEO. Nevertheless, there has yet to be an official word from RIL on who else will be joining JFSL. However, there are a few names that are already doing the rounds in the industry.

S Prakash, managing director of Star Health Allied & Insurance, is a probable candidate as the vertical head of the health insurance portfolio. NS Kannan will superannuate as the managing director of ICICI Prudential Life Insurance and may be waiting in the wings to look after JFSL’s life insurance vertical.

Similarly, a potential candidate to look after the non-life insurance arm of JFSL could be Bhargav Dasgupta, the current managing director of ICICI Lombard General Insurance.

In conclusion, the entry of Reliance Industries into the insurance sector is expected to create market ripples for existing businesses, leading to increased competition and pressure to innovate.
However, it could also result in the introduction of new and innovative products and services; with the company’s focus on technology and digital innovation, it is expected to bring new ideas and best practices to the sector, which could benefit both customers and the industry as a whole.