Ad Here  
GI premium income to cross Rs 100,000 crore... A sunshine industry A boost to insurance industry… LIC stays unaffected by competition GI flourishes in high growth states There’s more to it than 49% UII tops in premium growth Risk must cover the ‘burning cost’ Promise of quantum growth 3 year policies would do good Operational efficiency will boost profit The pioneer crosses another landmark
A boost to insurance industry…
The long pending issue of Foreign Direct Investment (FDI) in insurance sector got resolved with the NDA government enhancing the limit to 49 per cent from the earlier cap of 26 per cent by way of amendment to the Insurance Act.

This is a welcome sign for non-resident Indians and for the insurance companies operating in India to get the much-needed capital from their overseas partners.

Why is the enhancement necessary at this juncture and what is the rationale behind this move?  

The insurance industry got liberalised more than a decade ago with the FDI limit of 26 per cent.  Now, the sector has grown by leaps and bounds, requiring urgent infusion of an additional capital. Without this extra money, the expansion of the industry appears bleak.  With the Indian partners shying away with their contribution due to financial constraints, it has become all the more necessary to enhance the limit to 49 per cent.

Going by the present trends in the industry, a conservative requirement of funds to the tune of Rs. 60,000 crore is needed for future expansion that is likely to happen in the next five to six years.  This mega infusion of capital would be quite possible only with the hike of 49 per cent in FDI, which also envisages the overseas partner gain an upper hand in the investment portfolio much ahead of their Indian partners and stake a better claim in profit sharing.

What is in it for consumers?

Surprisingly it is not going to benefit the consumer in a big way. Of course, he remains a key target for all the insurance firms who try to capture maximum retail business from the general public. India is a market with low insurance penetration. In view of the tremendous potential for insurance firms to rope in more and more customers into their fold, the hike in FDI limits has augured well.

With newer insurance companies setting their shops in the country, the common man is provided with wider choice of insurance products to pick out the right one weighing the various parameters like reputation, service aspects and claim settling capabilities...


Bright future for insurance companies

Indian insurance sector is still regarded an attractive market for overseas firms to channelise their capital both in terms of medium and long term in comparison to the other economies where stagnation has crept in.  The entry of more number of players in the insurance segment is believed to give a big boost to the job market, as recruitment of personnel would be done on a massive scale.

Considering the large population of uninsured masses and their growing per capita income, the future looks bright for the insurance.  Industry experts say that the move is in line with the industry’s expectations and view it as a significant step in the right direction as the benefits reaped are by four interested segments: insurance industry, overseas investors, Indian citizens and, above all, the Indian economy.

Besides, the enhancement is likely to enable product innovation, customer service delivery and promotion of inclusive economic growth.   The move is hailed by the government to help in financial inclusion initiatives. 

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236