The Indian government is thinking over to permit 100 per cent foreign direct investment (FDI) in insurance broking to further enhance the growth of the Indian insurance sector. As per the current foreign direct investment (FDI) policy, 49% of foreign investments are allowed in the insurance sector under automatic route. The broad insurance industry encircles insurance companies, insurance broking, third party administrators and many more.
In recent years, foreign direct investment (FDI) norms have been liberalised for the financial services sector. In 2016, the government permitted 100% foreign direct investments in commodities broking and other financial broking services which covers 18 different areas specified for non-banking financial companies (NBFCs).
As per the recent reports, the insurance industry is of the view that insurance broking is like any other financial broking services and hence to be treated at par with other financial intermediary services wherein 100% foreign direct investments are permitted. The matter was time and again presented to the government. And, the issue was also discussed in high-level inter-ministerial meetings.
The government has also sought views from Department of Industrial Policy and Promotion (DIPP) on this matter. Considering the low insurance penetration rates, India is considerably an underinsured market. To boost insurance penetration in India, there is a huge requirement to strengthen the entire insurance distribution network.
Government’s positive outlook on mulling 100% foreign direct investment in insurance broking services can surely work in favour of the insurance industry as a whole. Liberalisation of foreign direct investment norms for insurance broking services can result in increased insurance penetration. Along with the overall economic growth in the country, the insurance sector and the policyholders will have potential benefits. The relaxation of norms which is overdue for long can bring in the best global practices in terms of risk management and other insurance services. More and more entry of global brokers would enhance the efficiency, quality and overall growth of an underpenetrated Indian insurance market.