NEW DELHI: With the government seeking to further liberalize the foreign direct investment (FDI) cap in insurance companies to 74 per cent from the existing 49 per cent, experts say that a higher FDI limit will help insurers access fresh capital to improve insurance penetration, and bring in better technical know-how and innovation to the advantage of the consumers.
Policyholders, they say, will get a wider choice, access to more innovative products, and a better customer service and claims settlement experience.
“The current higher cap of FDI will strengthen the industry and provide capital for growth requirements. As the industry grows and the financials become stronger, it paves the way for more value added products which address policyholders’ needs,” said Subhasish Acharya, chief distribution officer, Future Generali India Life Insurance.
The decision is also expected to reduce the demand-supply gap. “I believe that high technology must be complemented with high touch for a successful life insurance company. Policyholders in tier-2 and tier-3 towns and beyond will benefit from the investments made by companies in tech and last mile connectivity,” he added.
According to Jyoti Prakash Gadia, managing director, Resurgent India Limited, there is scope for substantial expansion of the existing large ventures given that India still has a insurance penetration percentage of less than four per cent (premium as a percentage of GDP) as against the world average of six per cent.
Moreover, the post Covid-19 scenario has resulted in more demand, particularly for health insurance. Higher capital will ensure that companies are able to meet the future claims. In addition, the government has announced several safeguards to protect policyholders’ money. The majority of the directors in the board and key management personnel will need to be resident Indians so that they are accountable to Indian laws and courts. The government will also prescribe a specific percentage of the profits that will have to be treated as general reserve.