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FDI Limit in Insurance Sector Increased To 75%

With the government seeking to further expand the FDI cap in insurance companies to 75 per cent from the previous 49 per cent, experts say that a higher FDI limit will help insurers’ access fresh capital to improve insurance penetration and introduce better technical know-how and innovation to the dominance of the consumers.

Policyholders, they say, will get a broader choice, access to more innovative products, and a better customer service and claims settlement experience.

The current higher cap of FDI will reinforce the industry and provide capital for growth requirements. Moreover, as the industry grows and the financials become more robust, it paves the way for more value-added products which address policyholders’ needs.

The decision is also expected to lessen the demand-supply gap. It is believed that high technology must be complemented with high touch for a successful life insurance company. Policyholders in tier-2 and tier-3 towns and beyond will get benefit from the investments made by companies in tech and last-mile connectivity.

There is an opportunity for substantial expansion of the existing big ventures, given that India still has an insurance penetration percentage of less than four per cent (premium as a percentage of GDP) in opposition to the world average of six per cent.

Moreover, the post Covid-19 scenario has followed with more demand, particularly for health insurance. Higher capital will ensure that companies can meet future claims. In addition, the government has announced various safeguards to protect policyholders’ money. The most of the directors in the board and key management personnel will need to be resident Indians to be accountable to Indian laws and courts. The government will also prescribe a particular percentage of the profits that will have to be treated as general reserve.

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