The government is considering allowing 100 percent foreign direct investment in insurance broking with a view to giving a boost to the sector and attracting more funds.
The FDI policy, at present, allows 49 percent foreign investment in the insurance sector that encompasses insurance broking, insurance companies, third party administrators, surveyors and loss assessors as defined by the Department of Industrial Policy and Promotion.
An official said that representations have been made to the government that insurance brokers should be treated at par with other financial services intermediaries, where 100 percent FDI is permitted.
“Insurance broking is like any other financial or commodity broking services. The issue was recently discussed in an inter-ministerial meeting. The government is positively looking at the matter,” the official said.
The official, however, clarified that the FDI cap for insurance companies would remain at 49 percent.
Further, industry experts stated that the insurance sector is being impacted due to weak distribution networks.
There is a need to strengthen the distribution network to support the sector as a whole.
According to Prudent Insurance Brokers Director Pavanjit Singh Dhingra, the decision would help strengthen distribution as it is not high capital intensive business.
The removal of foreign investment limit will encourage more players in the markets with high technology, he said, adding it will help increase insurance penetration as India has low penetration.
Insurance penetration in the country was 3.4 percent in 2015 against the world average of 6.2 percent. It was 3.3 percent in the country in 2014.
