In a release, it said the opening up of the insurance sector was unlikely to threaten existing players as it would take at least five years for new players to establish themselves. "The move will benefit customers significantly by way of new products with better features, better customer service," it said.

The group said the health insurance market in India was underdeveloped with a very low penetration of 20 lakh customers and a premium income of Rs 20 crore. The product mix in life insurance was also highly skewed in favour of relatively costlier endowment/moneyback policies as opposed to whole life and term insurance with living benefits (like LIC's Bima Sandesh and Bima Kiran). This is mainly due to lack of competition and lack of customer awareness.

Inmany Asian countries whole life and term insurance products were aggressively marketed to increase coverage of population, it added. In Japan, whole life and term insurance accounts for over 50 per cent of the new business.

The government should restrict entry only to serious players with strict solvency norms and ensure a healthy growth by setting up a strong regulatory authority as is prevalent in several Asian countries, it suggested.