The Indian government is preparing to implement significant reforms in the insurance sector by permitting 100% foreign direct investment (FDI) in insurance firms. This potentially transformative decision will enable international players to enter the market independently and will also allow individual insurance agents to sell policies from various companies, marking a notable shift from the current restriction to a single association.
These policy changes are components of the Insurance Amendment Bill, which is scheduled to be presented in the upcoming winter session of Parliament. This initiative aims to achieve “Insurance for All by 2047,” as per the Insurance Regulatory and Development Authority of India (IRDAI).
The existing ceiling for foreign direct investment in insurance firms is set at 74%, with intermediaries benefiting from relaxed regulations. The industry currently consists of 24 life insurance companies, 26 general insurance firms, six standalone health insurers, and one reinsurer—General Insurance Corporation. By increasing the FDI limit to 100%, the policy change intends to entice new entrants with the financial capacity necessary to underwrite policies in a capital-intensive sector and in turn expand the Indian insurance market with new players.
Apart from the FDI proposal, allowing agents to directly sell policies from multiple companies is another policy initiative being considered for implementation. It will make it easier for agents to operate in transparent and efficient manner. Moreover, IRDAI has proposed enabling insurers to obtain composite licenses, allowing a single company to issue both life and non-life insurance policies.
These new measures will set Insurance in India for a breakthrough growth as insurance penetration in India remains low at 4% and 100% FDI will drive innovation in this capital-intensive industry with presence of standalone Foreign Insurance companies.