The central government of India is all set to introduce major reforms in the Insurance sector, by increasing foreign direct investment (FDI) from 74% to 100%, relaxing regulations for insurance agents.
According to the reports of TOI, Insurance Regulatory & Development Authority of India (Irdai) chief Debasish Panda, suggested the proposal to increase in the FDI ceiling, linking it with “Insurance For All by 2047”.
Irdai (Insurance Regulatory and Development Authority of India) chairman, Debasish Panda suggested the government to allow 100% Foreign direct investment saying, “We need a lot of capital, which means we need a lot of new entities to come in… If the FDI route is also opened, that will only augment the domestic investment as well, otherwise, domestic investment may get crowded out,”
These changes are part of the proposed Insurance Amendment Bill, which is expected to be introduced during the upcoming winter session of Parliament later the month of November.
Currently insurance market of India includes about 24 life insurance companies, 26 general insurance companies, and 6 standalone health insurance providers. The General Insurance Corporation is solely responsible as the reinsurer in the country.
Benefits of 100% FDI in Insurance sector.
The foreign direct investment (FDI) limit for insurance companies till now was at 74%. However, the upcoming bill aims to remove this cap completely, boosting global competition by allowing foreign companies to enter and operate freely in the market. This change is expected to bring in major global insurance firms, increasing competition and encouraging more investment in the sector.
With a population over 1.4b, insurance penetration in India is still low at just 4%, and the government is focused on making big improvements. Also the government’s assessment shows that big domestic players like ICICI, SBI, HDFC Bank, Tataand Birla already have a strong hold in the market. But to grow the capital and the business for the long term, there may be only a few domestic companies with enough financial strength to compete on a large scale.
The government is also planning to take several other steps hoping to attract investors all over the globe. One significant proposal by IRDAI is allowing insurers to get a composite license, which would let a single company offer both life and non-life insurance policies. This could be especially helpful for companies like the state-owned Life Insurance Corporation of India (LIC), which wants to buy a health insurance company to expand its services. There are also plans to ease solvency rules, which would free up more capital for insurers and help them take on more policies.
This initiative by the govt. will not only allow the customers to explore a wide range of products in one place, but will also allow them to enter the market without relying on intermediaries tied to specific companies. Interestingly, some foreign companies, like Allianz, which is reportedly planning to end its partnership with Bajaj Finserv, may now look to enter the Indian market on their own.
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