The proposal to permit 100% foreign direct investment (FDI) in India’s insurance sector has prompted varied reactions from industry leaders.
Currently, India caps FDI in insurance companies at 74%, with fewer restrictions on intermediaries.
Introduced as part of the Insurance Amendment Bill, the measure seeks to attract global players into the market while raising questions about its potential impact on domestic insurers and market competition.
Sumit Bohra, president of the Insurance Brokers Association of India (IBAI), pointed to both the opportunities and challenges such a policy might bring.
He said that allowing global insurers greater access could increase capital flow, bring advanced technology, and expand insurance penetration in India. However, there are risks, including regulatory hurdles and the possibility of market saturation, which could harm smaller domestic insurers.
“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,” Bohra said.
He emphasised the importance of regulations to balance market competition and prevent monopolistic tendencies.
“To unlock the full potential of FDI, robust regulatory frameworks must be in place to safeguard local players and ensure balanced competition. Opening our market should mean fostering growth and innovation – not marginalising domestic talent,” he said.
Pavanjit Singh Dhingra, joint managing director of Prudent Insurance Brokers, emphasised the need for a well-rounded insurance ecosystem.
“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.
He also advocated for reforms such as perpetual licenses for intermediaries, which could provide stability and continuity in the sector.
“For India, 100% FDI, accompanied by a specialised insurance approach, could accelerate growth. Furthermore, 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,” he said.
The proposed amendments also focus on simplifying regulations for agents.
Under the current system, agents often use family members to represent multiple insurers due to restrictive rules. The new policy would allow agents to formally sell products from more than one insurer, which is expected to improve transparency and broaden consumer access to insurance options.
The Insurance Regulatory and Development Authority of India (IRDAI) is considering additional measures to strengthen the sector. Proposed reforms include introducing composite licenses, which would let insurers offer both life and non-life policies under a single entity.
There is also discussion about reducing solvency requirements to free up capital for underwriting, enabling insurers to expand their operations.
