Comments
The capital starved insurance industry is expected to get a major boost as the Finance Minister proposed an increase in the foreign direct investment limit from the current 26 per cent to 49 per cent in the Budget.
If the hike in FDI limit goes through, it will be a shot in the arm for the capital intensive life insurance industry which has been seeing a decline in new business individual premium collection over the last two years.
According to Vibha Padhalkar, ED and CFO, HDFC Life, FDI will help smaller insurance companies to break-even faster and help monetise the holdings of the promoters of the older life insurance companies.
She expects immediate inflows of $2 billion. The inflows could reach $ 10 billion in the longer term.
In the Budget announcement, Jaitley said that benefits of insurance in India have not reached a large section of the people as insurance penetration and density are very low.
Kshitij Jain, MD and CEO, Exide Life Insurance, said the industry has been cautious in selling products which are capital intensive such as unit-linked insurance plans and non-participating products and with enhanced capital, the industry will be able to become more aggressive.
Pankaj Razdan, MD and CEO of Birla Sun life Insurance, said that insurers will not just get capital but also technology and product expertise of the foreign partner who is the domain expert.
More players “We expect about 100 life and non-life insurance companies to serve a market of our size. Increasing FDI could see 25-30 new insurers entering the market,” said Sunil Sharma, Appointed Actuary, Kotak Life Insurance.
Insurance companies also feel that the increase in the limit of Section 80C to ₹1.5 lakh will help channel more long term savings towards life insurance due to the enhanced tax benefit.
The proposal to raise FDI cap has been pending since 2008 when the UPA Government came up with Insurance Laws (Amendment) Bill to hike foreign holding in insurance joint ventures to 49 per cent from the existing 26 per cent.
Jaitley said in the Budget that the Bill to hike FDI in insurance will soon be taken up in Parliament.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.