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3 weeks ago
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ARTICLE AD BOX
Summary
Opening the insurance sector fully to foreign ownership may bring in more investment—but it won’t be a silver bullet. For this sector to supply the sort of long-term funds that India’s economy needs, strong brands must do the hard work of widening coverage.
Can India’s insurance sector help mobilize more long-term capital? How much of a difference will the Centre’s proposal of raising its foreign direct investment (FDI) cap to 100% from 74% make?
The sector was opened up to foreign insurers via joint ventures (JVs) in 2000, but state-run LIC’s dominance remains mostly intact. After the FDI cap was lifted to 74% in 2021, a few foreign insurers raised their stakes in JVs and we saw one new entry.
Full ownership would mean no local partner can block key plans, so those stakes might rise further. Will new players enter?
The Indian market’s allure is up for another test. India’s insurance coverage needs to widen, but it’s a closely regulated sector. While tight controls are needed to ensure long-range commitments are met, they also limit the scope for innovation that a fresh dose of rivalry may provide.
In other words, we can’t really expect opening this market further to show dramatic results. New investments will help, no doubt, but market expansion will need to be driven by insurers with wide brand recognition. And for insurance to become a major funder of long-gestation projects, India’s vision of coverage for all by 2047 must materialize.
English (US) ·