INSURANCE
Life insurance firms pitch for hike in FDI limit to 100% in sector through automatic route
Dec-20-2019

Life insurance companies have pitched for 100% foreign direct investment (FDI) limit for the sector through automatic route in a detailed presentation to the Insurance Regulatory and Development Authority of India (IRDAI). This may help the sector to attract capital of Rs 40,000-60,000 crore. Besides, India has received nearly Rs 30,000 crore worth of FDI in the private sector insurance firms since 2015, when the government increased FDI limit from 26% to 49%. Investment under the automatic route does not require prior approval from the government.

The IRDAI said the government will examine suggestions of further opening of FDI in aviation, media (animation, visual, gaming and comic) and insurance sectors in consultations with all the stakeholders. The life insurers said the government should allow both the options FDI and FII (foreign institutional investors) in opening the insurance sector to 100% via the automatic route. This will give insurance companies an option to decide on which route they would like to take (FDI or FII or a combination of the two), to increase the limit to 100%, and added that there should be no conditions for foreign investors for moving from 49% to 100%, such as restriction on voting rights and India ownership, among others.

If the limit is increased from 51% to 100%, another Rs 40,000-60,000 crore of inflows are attainable, based on current valuations. Rise in FDI will help the country better technical know-how, better insurance penetration, and better training of stakeholders, etc. It will also help in higher settlement claims, better persistency and early claim reduction. Among others, the increase in foreign stake will also help the private life insurance sector increase its market share and help in bringing more technical expertise on risk-based capital which developed markets have already implemented. More capital injection will help in expanding the business that will further help in generating more employment, thereby addressing the employment issues.

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