FDI in the insurance limit is capped at 49 percent at present
Finance Minister Nirmala Sitharaman has proposed a 100 percent foreign direct investment (FDI) in the insurance intermediaries in the Union Budget 2019. The FDI limit is set at 49 percent currently.
Sitharaman also said that the government was also looking into the possibility of hiking the FDI limit in the insurance companies. However, she did not indicate the new cap that the government was considering. Nevertheless, there were indications that the Narendra Modi-led government had been in favor of a 74 percent FDI cap for insurance companies.
The Insurance Act (Amendment) Act 2015 increased the FDI cap in the insurance sector to 49 percent from 26 percent. This law was passed amidst stiff protests from the opposition parties who expressed concerns about foreign entities controlling the Indian insurance sector.
However, the government has been considering the 100 percent FDI in insurance intermediaries proposal for the past two years. The insurance regulator was also in favor of a 100 percent FDI for insurance intermediaries.
Insurance intermediaries include insurance brokers, insurance repositories, third-party administrators as well as web aggregators like Easypolicy.com Several foreign companies like Marsh and JLT are present in the insurance broking space.
It is expected that the 100 percent FDI will help in the infusion of capital into the intermediaries segment.