100% FDI will foster competition, best practices, say insurers

Many life insurers, including the industry leader LIC are keen to get into the lucrative health insurance segment.
Govt proposes to raise FDI limit in insurance sector to 100%, seeks public comments.
Govt proposes to raise FDI limit in insurance sector to 100%, seeks public comments.
Updated on
3 min read

MUMBAI: The 58-player insurance industry is likely to witness some ownership changes with the budget proposing full foreign ownership in the sector from the present 74%. Of the total players, 24 are life players and 33 are general insurers and, GIC Re is the sole re-insurer owned by the government.

Four of the 33 non-life players are also under government control while the industry leader LIC is also 97 percent owned by the government. The industry is happy with the budget proposal even though the finance minister ignored her own previous promise as well as the industry’s long standing demand for a composite licensing structure for the industry which would have allowed a life player to offer health products as well—though this was allowed till 2016 when the regulator IRDAI sumo moto disallowed them to do so.

Many life insurers, including the industry leader LIC are keen to get into the lucrative health insurance segment. The national insurer is advanced stage of discussions with private players to pick up a majority stake, according to chief executive Siddhartha Mohanty.

Though 74% FDI in the insurance sector was allowed since December 2022—up from 26 percent when the sector was opened to the private sector in 200, only two foreign companies chose to increase their stakes to the maximum regulatory caps.

While the Italian major Generali chose to buyout a majority in Future Generali General Insurance after its domestic partner Future Group went bust and now owns 74%, the Japanese financial major Nippon picked up 74% in the two insurance companies initially promoted by the now bankrupt Reliance Capital group of the now crippled Anil Ambani group.

While the German insure major Allianz was keen to increase its stake in the two insurance joint ventures promoted by the Bajaj group, instead of allowing the same, Bajaj group chose to part ways with them last year. Sharad Mathur, managing director of Universal Sompo General Insurance said the increase in FDI limit to 100% is a significant development, which is expected to accelerate insurance inclusion across the nation.

“This move is likely to attract substantial foreign capital while also fostering innovation and improving service quality through technological advancements. As a result, global insurance companies can now invest fully, and we anticipate the emergence of innovative products and services tailored to meet the diverse needs of Indian consumers,” he said.

Tarun Chugh, managing director of Bajaj Allianz Life feels 100% FDI will bring in fresh capital and bolster the industry's financial strength. The decision reflects the government’s continued commitment to making the country a prime investment hub for stable, long-term capital.

“Greater foreign participation will accelerate the adoption of global best practices, introduce innovative products, and elevate customer service standards. Additionally, the mandate to invest premiums within the country ensures that these funds contribute to domestic economic growth and infrastructure development,” Chug said, adding the next five years present a significant and an exciting opportunity to propel the industry forward onto greater heights by enhancing industry competitiveness, driving innovation, and expanding insurance accessibility, though Bajaj Alliance refused to allow its foreign partner Allianz to increase their stake.

Anand Roy, managing director of the standalone health player Star Health & Allied Insurance, 100% FDI will attract global capital, enhance competitiveness and efficiencies, and help expand insurance coverage where penetration remains below 5% even now and lead to vision of 'insurance for all by 2047'.

Tapan Singhel, managing director of Bajaj Allianz General Insurance said the move will foster greater competition, bring in global expertise, and drive deeper penetration. “By allow 100% FDI, we could see the country moving towards a future with 1,000 insurers in the next decade. A larger number of players will bring greater competition, leading to enhanced innovation, customer-centric products, and improved service delivery.

More insurers mean better awareness, wider choices for consumers, and a stronger push for financial protection across all segments of society,” Singhel said.Sumit Bohra, president of the Insurance Brokers Association of India said enhancing FDI to 100% will help enhance underwriting capacity, and foster innovation through global partnerships.  Prashant Tripathy, managing director  of Axis Max Life Insurance, said the 100% foreign ownership will contribute to the goal of achieving insurance for all by 2047 as the move will drive greater capital infusion apart from fostering innovation, enhancing competition, and accelerating insurance penetration.

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