The Centre has sought the views of the insurance industry on raising the foreign direct investment in the sector. While some favour a hike in the limit to 74 per cent or beyond, others are opposed to opening up an under-penetrated market to foreign players. Currently, foreign direct investment (FDI) in insurance is capped at 49 per cent under the automatic route.

Sources said the government seeks industry comments every year as part of its budget exercise. The government in the last budget had allowed 100 per cent FDI for insurance intermediaries including brokers and third-party administrators.

“They had also announced the intent for further opening up the sector to private players. Now the industry has been asked to give their comments,” said a director of a general insurance company.

Industry regulator IRDAI has sought the comments from the general and life insurance companies to increase FDI. Private insurers with foreign partners are in favour of an increase in the FDI limit to 74 per cent or even 100 per cent under the automatic route. By opening up the sector, the industry could attract investors and deepen the reach through more players, products and intermediaries.

According to the IRDAI, during the first decade of liberalisation, the sector has reported an increase in insurance penetration to 5.20 per cent in 2009 from 2.71 per cent. But, it declined to 3.70 per cent in 2018. Insurance penetration is measured as the percentage of insurance premium to GDP.

But there is a counter-view as well from public sector insurers. “A foreign player with management control will only be interested in cherrypicking. They will only be interested in particular insurance lines which are profitable. This will put tremendous pressure on the public sector insurance companies,” said an executive of a PSU insurer.

However, any change would require a legislative amendment. The government will have to amend the Insurance Act, alter provisions pertaining to Indian ownership and monitor the solvency of foreign firms.

The Rs 5 lakh crore insurance market in India comprises of 24 life insurance companies, 27 general insurance companies, 7 standalone health insurance companies and 12 reinsurers.

The government will have to amend the Insurance Act, alter provisions pertaining to Indian ownership and monitor the solvency of foreign firms to facilitate the 74 percent investment limit or more.

The Rs 5 lakh crore insurance market in India comprises of 24 life insurance companies, 27 general insurance companies, 7 standalone health insurance companies and 12 reinsurers.