The excitement is on the FDI easing. They say it will dramatically transform the outlook and strategies of the main players in the market. Some just need it to get more capital pumped in to improve systems and processes. But the excitement is palpable as the magic of the FDI easing is in the air even as both the life and general sectors are thriving with chilling challenges and cheery prospects.
And on an individual company level, five Indian companies walked away with the prestigious Awards from the 2014 Asia Insurance Industry Awards, a resounding endorsement of the India insurance industry. We salute the Insurance Institute of India as it celebrates its Diamond Jubilee.
Market waits with bated breath for FDI announcement
By Jimmy John, AIR correspondent, South Asia
The Indian insurance industry is eagerly awaiting a decision from the new central government to hike the foreign direct investment (FDI) limit to 49% from the current 26%. The passing of the Insurance Laws (Amendment) Bill that proposes this hike in FDI is being debated in the country’s Parliament and a decision is expected anytime soon.
The FDI limit for insurance in India is among the lowest globally. China, Indonesia and Malaysia have an FDI limit of 50%, 80% and 51% respectively. Japan, South Korea, Vietnam, Hong Kong and Taiwan allow 100% FDI. An increase in the FDI limit could see the insurance sector receive an inflow of US$10 billion. Only about 6% of Indians have some form of insurance cover and of these, about 4.4% have life insurance and 5% have a health cover. Given these circumstances, the need of the hour is support for the insurance industry through long-term capital infusion by hiking the FDI limit.
Since the opening up of the sector in 2000, the India insurance industry has undergone a major transformation and currently consists of 52 players of which 24 are life and 28 are non-life insurers. The total penetration of insurance has increased from 2.3% in 2000 to 3.96% in 2012-13 and the insurance density in the country has increased from $10 in 2000 to $53.20 in 2012-13.
Over the past 15 years, the market has witnessed increased coverage of lives/health, introduction of customer-centric products, rapid growth of multiple channels, enhanced reach, and increasing competitiveness in the market. The emergence of new distribution channels has changed the game altogether and people no longer have to depend on the ubiquitous agent for their insurance needs as the bancassurance, broking and corporate agency channels ensure that insurance products are available even at the remotest parts of the country.