Nirmala Sitharaman, presented her maiden Budget on July 5, 2019. Among the several segments that she touched upon, Foreign Direct Investment was of substantial significance. She has proposed to increase the current Foreign Direct Investment (FDI) limit for the insurance intermediaries from the current 49 % to 100 % in the Union Budget 2019.
Commenting on this development, Govinder Kapoor, Chairman, Proclaim Insurance Surveyors and Loss Assessors, said, “ An increase in FDI would stimulate further investment in the insurance intermediary sector by foreign insurance surveyors and loss assessors, along with other intermediaries. This will lead to the enhancement of service standards in alignment with global trends which would benefit policyholders interest”.
Increase in FDI would give an opportunity for the profession to develop greater intellect to service products that were previously unavailable in the Indian market, thus enhancing products and services currently available and allowing each domestic firm to leverage international best practices and use them with their local knowledge and expertise.
Ankit Agrawal, CEO and CoFounder, InsuranceDekho, commented, “ India is an underinsured market especially in the rural areas. The proposal will help the sector with required capital infusion into the intermediaries segment. They can expand their distribution networks in the rural areas as well. The capital infusion will help with driving innovation and improving product offerings in the sector”.
Industry experts believe that, currently in India, there is a huge gap between the technology used by the insurers and surveyors. Entry of foreign players will also bring in the latest technology and advanced digital platform used by surveyors worldwide. This will help to address the growing needs of insurance industry within India and create more value for policyholders. This ensures higher insurance penetration and facilitate in further opening up of the Indian economy.
Sumit Rai, MD and CEO, Edelweiss Tokio Life Insurance also said, “The proposed idea will have a positive impact on customers, intermediaries and the sector. Insurance distribution is an upfront-capital intensive business with a long gestation period, and given low insurance penetration in India, there is a significant need to strengthen existent distribution networks to expand faster in non-urban markets, deepening insurance penetration in the country.”
Experts also shared their views that this move will also help reform existing customer practices by leveraging global best practices and elevating customer experience in India, as far as insurance is concerned.
Ashish Vohra, ED and CEO, Reliance Nippon Life Insurance said, “The announcement will bring in cost effective capital for several insurers who are investing in technology and digital solutions, and are wanting to expand network to grow and make multi-fold impact towards building a long term and sustainable insurance sector. Also, the insurance penetration in India is lower than other Asian countries, and more FDI will help in driving this positively.”
The Insurance Act (Amendment) Act 2015 increased the FDI cap in the insurance sector to 49 % from 26 %. Insurance Regulatory and Development Authority of India was also in favour of a 100 % FDI for insurance intermediaries. On the other hand, the government has been considering the 100 % FDI in insurance intermediaries proposal for the past two years.
Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance said, “ When it comes to opening up of 100 % FDI in intermediation in insurance, we will have to wait and watch on how this develops further”.