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 * Insurance
 * 3 min read


100% FDI IN INSURANCE LIKELY TO BRIDGE GAP, ROBUST REGULATORY FRAMEWORKS
REQUIRED

The Indian government is set to revamp the insurance sector. A key proposal is
to permit 100% foreign direct investment. This move aims to boost the insurance
industry. It will also help India achieve its goal of 'Insurance for All'. The
proposal has sparked debate. Some experts welcome the potential benefits.
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V
 * Vikas Kumar ,
 * ETBFSI

 * Published On Nov 23, 2024 at 08:00 AM IST

Read by: 727 Industry Professionals
Read by 727 Industry Professionals

Government is likely to introduce significant reforms in the insurance sector,
including allowing 100% foreign direct investment (FDI), a recent report has
said.

The move will be a part of the proposed Insurance Amendment Bill, which is
expected to be presented during the winter session of Parliament.

It is believed that this move will open more avenues for the insurance business
and will be a key driver in India’s aims to achieve 'Insurance for All’.

Currently, the FDI cap for insurance companies is set at 74%.

Bridge the insurance gap

Alok Rungta - MD and CEO at Future Generali India Life Insurance, believed that
allowing 100% Foreign Direct Investment (FDI) in India's insurance sector
presents a pivotal opportunity to bridge the insurance gap. Foreign insurers
bring advanced underwriting practices, robust risk assessment models, and
cutting-edge technologies that can modernize India's insurance landscape.



Advt


“Additionally, they implement comprehensive risk management frameworks that
ensure financial stability and customer trust. Exposure to these global
standards can cultivate a culture of proactive risk management among Indian
consumers, encouraging the adoption of diverse insurance products,” he added.

Complexities in adapting to local consumer preferences

Speaking on the complexities that 100% FDI could bring in, Sumit Bohra -
President of Insurance Brokers Association of India (IBAI) said, “Navigating
domestic and international regulations is not just a logistical burden but an
expensive endeavor. An influx of foreign players risks saturating the market,
which could stifle smaller domestic insurers.”



“Foreign firms may also face difficulty adapting to local consumer preferences,
and without careful oversight, there’s a risk of foreign giants distorting the
market balance and establishing monopolistic power. Profit repatriation is
another key concern, as profits flowing overseas do not necessarily translate
into benefits for the local economy,” he added.

To unlock the full potential of FDI, robust regulatory frameworks must be in
place to safeguard local players and ensure balanced competition, he said.

Echoing with Bohra, Pavanjit Singh Dhingra - Joint MD, Prudent Insurance Brokers
said, “Navigating a complex web of domestic and international regulations is not
only a logistical challenge but an expensive undertaking.”


Advt


“Today, many foreign insurers already partner with domestic entities in India,
often holding majority stakes. This shift risks sidelining medium and smaller
insurance players, increasing the probability of market consolidation,” he
added.

He suggested that if India aims to achieve 'Insurance for All,' we need a robust
landscape with at least 80 to 100 insurance companies, fostering healthy
competition and consumer choice.

He said implementing perpetual licenses for intermediaries like brokers would
add much-needed continuity, aligning India’s goal to make insurance accessible
to all by 2047 with a supportive, diversified insurance ecosystem

Anticipate the rise of specialized players

Sharing the brokers perspective, Abhijeet Sethi, COO, Howden (India) said, “For
brokers, the influx of insurers brings an amplified responsibility to navigate
an increasingly complex market landscape. Our role in analysing and presenting
optimal solutions becomes more pivotal, deepening client reliance on our
expertise.

“Additionally, we anticipate the rise of specialized players across various
business lines, fostering innovation and niche offerings. The affinity insurance
segment is also poised for significant growth, creating new opportunities for
customized group policies,” he said.








   
 * By Vikas Kumar ,
 * ETBFSI

   
 * Published On Nov 23, 2024 at 08:00 AM IST
   


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