Private life insurers hailed the Union Cabinet’s decision to increase the foreign direct investment (FDI) limit in insurance sector from 26 per cent to 49 per cent.
The FDI limit hike is, however, subject to Parliament approval.
Reacting to the decision, Puneet Nanda, Executive Director, ICICI Prudential Life Insurance, said this is a very welcome step.
“Life insurance industry needs a lot of capital. Many companies which need capital to fund their business growth will benefit from this decision. After Parliament approval, one could even see many more foreign players entering India”.
Currently, there are 24 players in the life insurance industry, including 22 joint ventures with foreign participation to the extent of 26 per cent.
Domain capital
Rajesh Sud, CEO and Managing Director, Max Life Insurance, welcomed the decision stating that it will bring in domain capital to the industry.
This would have been an opportunity to allow FIIs to also participate in the life insurance, since they are also a source of long-term capital, particularly in view of potential IPOs from life insurance companies, he said.
Customer penetration
Rajesh Relan, Managing Director and Country Manager, MetLife India Insurance Company Ltd, said the move is a positive move for the insurance industry.
“The biggest advantage of increasing FDI limit will be to grow the industry by increasing customer penetration with a range of products that are focused on today’s uninsured. The life insurance industry is long term in nature and requires years of capital infusion before it can sustain itself,” he said.
The growth and development of life insurance sector will further give a huge boost to the tertiary sector in India.
For the insurance companies to continue growing and increase penetration, the FDI limit increase to 49 per cent is essential and will help grow the industry, which is currently facing a slowdown, Relan said.
Shashwat Sharma, Partner for insurance sector, KPMG, hailed the decision as it would boost the confidence of global insurers and investors.
Boost confidence
The insurance industry has been struggling for a while on capital, which will now be forthcoming. There should also be more product and channel innovation with increase in competition expected, he said.
Sam Ghosh, Chief Executive Officer, Reliance Capital, said the industry was looking forward to this in the last 2-3 years.
He said such a move would help the industry grow and could even help new foreign players enter the Indian market.
Reliance Life Insurance is part of Reliance Capital.