Will not competition bring about lower premia besides mopping up domestic savings for investment?
I agree that our premium is among the highest, but it is because are forced by government laws to put our investments into the social sector with a four per cent return. Which financial firm in the world will invest in institutions and sectors where the returns are an abysmal four per cent? We invest in municipal corporations enabling them to provide the citizens of India with drinking water. Thus, we have our handicaps that force us to charge such high premia. Private insurance companies will invest their money in private companies, not in the social sector. We in India believe that insurance firms will bring in foreign direct investment for infrastructure. Yet, records show that private insurance companies spent 75 per cent of their money on acquisitions and mergers, rather than in creating fresh assets. Moreover, their investments are in consumer sector companies with high returns. Thus to believe that allowing private insurance will bring in funds for infrastructure is a myth. Toda
