The proposal to increase permissible Foreign Direct Investment (FDI) limit in the insurance sector could lead to more innovative products as insurance penetration increases, say industry experts
In a media briefing today, Secretary, DPIIT, Ministry of Commerce and Industry, Dr Guruprasad Mohapatra today said that increase in FDI limit from 49 per cent to 74 per cent in insurance companies announced in the Union Budget 2021-22 will have positive impact on the Indian economy.
He said that under the new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50 per cent of Directors being Independent Directors, and a specified percentage of profits being retained as general reserve. An Amendment in the Insurance Act, 1938 will increase the permissible FDI limit from 49 per cent to 74 per cent in insurance companies and allow foreign ownership and control with safeguards.
Speaking about the benefits of this, Dr Mohapatra said that it will enable global insurance companies to take more strategic and long-term view on the Insurance sector in India, thereby bringing in greater inflow of long-term capital, global technology, processes, international best practices. He said that the end consumer will also be benefited from it as it will boost competition, enable consolidation and increase insurance penetration, leading to more innovative and affordable products for the end-consumer.
Industry experts have reacted with cautious optimism.
Commenting on the move, Mayur Ranjan Dwivedi, Head – Business Strategy and M&A, Religare Enterprises said this move will allow foreign ownership and control safeguards, help liberalise the sector and improve penetration. “The limit hike will also attract enhanced capital flow to the sector and help insurance companies to raise funds. However, as mentioned by the Minister of Finance, the execution of the proposal will require amendments to Insurance Laws Act 2015 and Insurance Act 1938.”
Healthcare sector leaders too hailed the proposal. Vishal Bali, Executive Chairman, Asia Healthcare Holding felt that the insurance sector which is an important pillar for any country should see an exponential growth with this enhancement of FDI limit.
Terming the proposal to increase the permissible Foreign Direct Investment (FDI) limit in the insurance sector as a “step in the right direction” Sigal Atzmon, Founder and CEO, Medix Global analysed that if passed, the additional capital inflow and activity can provide a further boost to the industry to drive insurance penetration.
“As awareness grows, we believe we will also see more innovative services that will strike a balance of improving accessibility and medical outcomes, while at the same time help to lower out of pocket costs and reduce medical cost inflation. All stakeholders in the healthcare and insurance should join forces on this mission of ensuring sustainable care for all,” according to Atzmon.
Girish Rao, CMD, Vidal Health too commented that the increased FDI limit in insurance to 74 per cent is also a positive move as this allocation will allow for more investment in this space.
Saurabh Kochhar, Founder and CEO, Meddo opined that increased FDI in insurance can be utilised by the health sector to increase penetration and offer the much-needed security and cover for the masses.