IRDAI Chairman Debasish Panda proposed allowing 100% Foreign Direct Investment (FDI) in the insurance sector, stating that substantial capital is required to achieve universal insurance coverage by 2027.
Insurance Sector in India
Overview:
- India’s insurance industry is a significant sector with upward growth.
- It is the fifth-largest life insurance market in emerging insurance markets globally, growing at 32-34% annually.
- The industry consists of 57 insurance companies: 24 in the life insurance sector and 34 in the non-life sector.
- Among life insurers, Life Insurance Corporation (LIC) is the sole public sector entity, while six public sector insurers operate in the non-life segment.
Regulation:
- The Insurance Regulatory and Development Authority of India (IRDAI) regulates the insurance sector, ensuring compliance, protecting policyholders, and maintaining market stability.
Challenges in the Insurance Sector:
- Low Penetration & Awareness: Despite rising financial awareness, only 4% of the population is insured.
- Distribution Barriers: Limited rural infrastructure restricts product access.
- Regulatory Hurdles: Necessary consumer protections can stifle innovation.
- Fraud & Mis-selling: Erodes consumer trust.
- Tech Adaptation: Traditional firms struggle with digital adoption.
- Underwriting Risks: Limited data hampers accurate risk assessment.
- Intensified Competition: New entrants push existing players to innovate.
- Healthcare Inflation: Higher costs strain health insurers.
- Economic Factors: Inflation and economic shifts impact returns and policy obligations.
- Product Innovation: Balancing customization with affordability is key.
FDI in the Insurance Sector:
- The insurance sector received approximately Rs 54,000 crore in foreign direct investment (FDI) over the past nine years.
- The government increased the permissible FDI limit from 26% in 2014 to 49% in 2015 and further to 74% in 2021.
The Government of India measures to strengthen the insurance sector:
- Social Security Schemes: Initiatives like PMFBY for crop insurance, AB-PMJAY for healthcare, PMSBY for accidental coverage, and PMJJBY for life insurance.
- Technological Advancements: Promotion of insurtech and grievance platforms like IGMS.
- Financial Inclusion: Microinsurance regulations and Stand-Up India for loan access.
