The Indian government has proposed to increase FDI in the insurance sector to 49%. Currently, only up to 26% FDI is allowed in the Indian insurance sector under the automatic route subject to obtaining a license from Insurance Regulatory Development Authority (IRDA). According to “Booming Insurance Market in India (2008-2011)â€, a recent report from RNCOS, the Indian insurance market, particularly life insurance sector, will get a strong boost from the proposed FDI hike. Increasing limit to 49% is expected to raise the FDI in life insurance sector by around 2.5 times from the present level of approx Rs 2,500 Crore.
The senior insurance industry analyst at RNCOS opined, “The proposed increase in FDI will attract more foreign inflow into the Indian economy and strengthen the country’s insurance industry. This increase (in FDI) will bring more capital and help the sector in maintaining the growth momentum. The insurance sector has been in strong need of the capital investment, in fact, the requirement has increased dramatically due to recent losses on unit-linked products with weak stock market. Also, being a capital intensive sector, the insurance sector requires huge investments over a prolonged period of time, and therefore, there is constant need for capital infusion that can be met through FDI.â€
Increasing FDI limit will also encourage the insurance sector to come up with more innovative distribution channels, enrich the current product portfolio, upgrade technology, and bring best global practices into the country. Beside this, raising FDI cap would also help insurers to expand their coverage to rural and micro-insurance segments as penetration in rural and remote areas require additional capital infusion.
“Booming Insurance Market in India (2008-2011)†provides an exhaustive research and rational analysis on the Indian insurance market. This study provides an overview on the factors driving the insurance industry, coupled with the forces which are blocking the growth. The report, based on extensive quantitative and qualitative analysis, gives forecast on vital industry parameters, like cars & commercial vehicle registrations, outbound tourists, medical equipment market, lending by financial institutions, IT spending, non-life insurance market, and health insurance premium.
This comprehensive study will help the clients to assess current market trends and identify the market dynamics and opportunities critical to their success in the country.
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