To boost up the insurance industry, the Finance Minister Nirmala Sitharaman made an announcement that sector will be fully open for the foreign direct investment. This is up from the previous limit of 74%.
As quoted by Business Standard Finance Minister Nirmala Sitharaman stated that, “This enhanced limit will be available for those companies that invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified.”
The Insurance penetration in the country has saw the modest rise in last decade. The Insurance penetration and density are the major indicators which are used to calculate country’s development of insurance sector. The Insurance penetration shows the total insurance premiums relative to GDP. On the other end the insurance density refers to the per capita premium. This is calculated by dividing total premium by country’s population.
Insurance Penetration has raised from 2.7 % to 3.7 % in India. On the other hand the Insurance density raised from $ 11.5 to $ 95 between 2001 and 2024. The global average for 2024 was 7% for insurance penetration and $ 889 for insurance density.
Insurance Penetration
The number saw a hike in next two years because of Covid, but got declined in 2022-23. and 2023-24. The overall insurance penetration in 2022-23 was 4%.
The got dipped in financial year 2023-24 to 3.7%. On other hand the Insurance density saw a growth over the years. But it remained lower than the global average. In 2023, the country’s Insurance density was 95 $ but the global average was 889$.
How The 100% FDI Will Impact The Sector?
With the introduction of FDI in 2000, the insurance sector in India has bagged Rs 82,847 crore in investments till September 2024. Due to this it saw a driving growth.
The Foreign Investment is likely to bring more players in the market. This will boost the confidence in the market. The 100% Foreign Direct Investment will make sure long-term availability of capital. This will make insurers to bag technologies, and strengthen the distribution network.
The Foreign investors involved in the Capital Intensive insurance sector have been a ardently advocated for easier norms that would allow better business decorum, their ask has sufficiently highlighted the challenges of securing a reliable domestic partners. As a response the government has been mulling over the possibility of revisions to FDI regulations including Provision related to Key Management appointments and board composition. These measures would help the government create a more conducive environment for foreign investments and expansion