100% FDI: The Opportunity
1The objective behind this move is to unlock the insurance sector’s full potential and take a step towards the ‘Insurance for All by 2047’ mission of the Insurance Regulatory and Development Authority of India (IRDAI). India’s total insurance premiums are set to grow by 7.1% from 2024-2028 which is way above the global markets forecast of 2.4%, as per a report by Swiss Re. The report highlights that at this pace, India will become the fastest growing insurance sector of the G20 countries.
Impact on the industry
Opening up to global insurers will ensure availability of long-term capital. Insurers can use this stability to adopt emerging technology, build resilient distribution networks, and jolt the competitiveness in the market. [2]
For the global insurers, the process will be far more simplified since they will not be obligated to collaborate with Indian partners for entry into the market. By removing these limitations, there is a chance of attracting more foreign investment, which can translate into more employment opportunities [3] .
This move will also enhance customer outreach which will help in tackling low insurance penetration in India’s rural and remote markets.
The reasons for low penetration of insurance in India has many factors at play such as low awareness, financial constraints and opting for traditional practices, among others [3] .
Impact on policyholders
[2]A bigger market will mean an intensified competition. For consumers, this will mean a lot more options to choose from, improved product offerings, affordable premiums, better customer services, among other things. This will also mean an increased outreach so more people will have access to insurance.
100% FDI: The Challenges
Low penetration
Over the years, there has not been a significant uptick in penetration of insurance in India due to various factors such as financial constraints, lack of awareness and a preference for traditional financial practices as opposed to insurance. [3]
Consumer Data Protection
By permitting more foreign investment and technology transfer, it will be a huge responsibility for the IRDAI to ensure that sensitive consumer data is safe in cross-border transfers. There will also be the challenge of safeguarding against cyber-crime [5] .
Industry Experts Speak…
[4]“With 100% FDI now allowed in insurance, India could be on the path to having 1,000 insurers within the next decade. A larger number of players will intensify competition, leading to enhanced innovation, customer-centric products, and improved service delivery,” said Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance.
More insurers mean greater awareness, wider choices for consumers, and a stronger push for financial protection across all segments of society,” he adds.
With regard to India’s vast and diverse population, Singhel said there is immense untapped potential in insurance. “In many developed economies, thousands of insurers operate to meet the varied needs of their citizens. For India to achieve deeper insurance penetration, expanding the number of players in the industry is crucial,” he said.
Which Countries Have 100% FDI In Insurance?
India’s move for 100% FDI in insurance is in alignment with Canada, Australia, Brazil and China. By doing this, India has brought its FDI policy at par with global best practices that will position the country as an appealing investment hub. India’s regulatory body IRDAI will be supervising this move to ensure that increased FDI will drive inclusive growth and not lead to foreign dominance in the market [3] .
Conclusion
All in all, FDI in insurance is expected to transform India’s competitive landscape. While the implementation may take some time, if executed well, this can mean a new era for insurance that is defined by innovation, advanced technology and greater accessibility. For now, the industry can keep an eye on potential regulatory and growth measures taken by the government.
References:
[1]https://www.swissre.com/institute/research/topics-and-risk-dialogues/economy-and-insurance-outlook/india-insurance-market-growing-fast-build-resilience.html
[2]https://economictimes.indiatimes.com/news/budget-faqs/budget-2025-fm-announces-100-fdi-in-the-insurance-sector-all-you-need-to-know/articleshow/117833675.cms?from=mdr
[3]https://www.business-standard.com/budget/news/budget-2025-100-fdi-insurance-penetration-density-lower-premiums-125020200472_1.html
4https://www.businesstoday.in/personal-finance/insurance/story/fdi-limit-in-insurance-sector-increased-to-100-india-could-be-on-the-path-to-having-1000-insurers-463017-2025-02-01
[4]https://www.business-standard.com/markets/news/100-fdi-in-insurance-foreign-insurers-may-face-distribution-challenges-125020301106_1.html
[5]https://www.lexology.com/library/detail.aspx?g=becabfe3-fa01-433b-b181-f69084bc5230
[6]https://www.businesstoday.in/personal-finance/insurance/story/fdi-limit-in-insurance-sector-increased-to-100-india-could-be-on-the-path-to-having-1000-insurers-463017-2025-02-01
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