FM proposes 100% FDI for insurance intermediaries; opposition expresses concerns

Finance Minister Nirmala Sitharaman has suggested a 100 percent foreign direct investment (FDI) in the insurance intermediaries in the Union Budget 2019. The FDI limit is kept at 49 percent currently.

Sitharaman also said that the government was also looking into the possibility of raising the FDI limit in the insurance companies. However, she did not mention the new cap that the government was considering. Nevertheless, there were indications that the Narendra Modi-led government had been in odds for a 74 percent FDI cap for insurance companies.

The Insurance Act (Amendment) Act 2015 raised the FDI cap in the insurance sector to 49 percent from 26 percent. This law was passed amidst tough protests from the opposition parties who expressed concerns about foreign entities controlling the Indian insurance sector.

Moreover, the government has been considering the 100 percent FDI in insurance intermediaries proposal for the past two years. The insurance regulator are looking at a 100 percent FDI for insurance intermediaries.

Insurance intermediaries include insurance brokers, insurance repositories, third-party administrators as well as web aggregators like Policybazaar. Several foreign companies like Marsh and JLT are present in the insurance broking space.

It is expected that the 100 percent FDI aid in infusion of capital into the intermediaries segment.