September 2, 2019
The Indian government has issued a notification putting into effect its decision to allow 100% foreign direct investment in insurance intermediaries. The FDI ceiling was previously 49%. Intermediaries include insurance agencies, brokers, third party administrators, surveyors, and loss assessors. The notification was issued by Department of Financial Services of the Finance Ministry on 27 August.
The decision is expected to encourage foreign brokerages buy into Indian companies and deepen the market in terms of new products and technology. Foreign brokers are already keen to expand. In March, Marsh raised its shareholding in its India joint venture to 49% from 26%, while in May, Gallagher took an undisclosed in Edelweiss Insurance Brokers. Other brokers such as Willis Towers Watson and Howden, owned by Hyperion, are also already in the market.
India is one of Asia’s key emerging markets and the long term potential in the country is clear. Fitch says,“We believe increased international involvement, particularly from developed markets, will contribute positively to the development of distribution networks, use of technology in distribution as well as bring in expertise in areas such as marketing and client-servicing. Fitch also expects the proposal, once implemented, to boost M&A in the fragmented insurance intermediary market over the medium term.”
Despite pressure to the economy, the long term prospects of India are good; around 600 million people in India are under the age of 25. There are plenty of opportunities in India as the economy becomes more sophisticated and the hundreds of millions of young people reach working age.