India’s insurance reforms: A bold transformation, but not without challenges

livemint.com:

Subscribe to enjoy similar stories. India’s insurance industry, long seen as an underpenetrated yet promising market, is poised for a major transformation with the government’s proposal to permit 100% foreign direct investment (FDI) in insurance companies and introduce composite licences. These reforms, if implemented effectively, could catalyze significant changes in the sector, attracting fresh capital, improving competition, and enhancing accessibility for consumers.

The proposal to allow 100% FDI in the insurance sector marks a pivotal moment in the liberalization of India’s financial services. Historically, foreign insurers were mandated to have Indian partner(s), with the maximum permissible foreign ownership capped at 74%. This structure, while aimed at safeguarding domestic interests, often deterred global insurance players from fully committing to the Indian market.

The proposed removal of the 74% cap will not only encourage global insurers to enter the market but also provide existing foreign investors the flexibility to expand their stakes or operations. One of the most anticipated outcomes of this move is the infusion of much-needed capital into the sector. Insurance companies require significant investments to build robust operations, develop innovative products, and scale their reach to underserved areas.