Budget 2019: Insurance Law Likely To Be Amended As FM Proposes FDI Cap Hike In Insurance Companies, Intermediaries

Union Finance Minister Nirmala Sitharaman has proposed a 100% foreign direct investment (FDI) in insurance intermediaries in the Union Budget 2019 which she presented. Presently, the FDI limit is set at 49%.

Sitharaman also said that the government is also looking into the possibility of hiking the FDI limit in insurance companies, but she did not indicate the new intended FDI cap.

It may be recalled that the Insurance Act (Amendment) Act 2015 had increased FDI cap in the insurance sector from 26% to 49%.

This law, which was passed amidst stiff protests from the opposition parties amidst concerns about foreign entities controlling the local Indian insurance sector, is likely to be amended if the FDI cap in the insurance sector is hiked.

Earlier, there were indications that the Narendra Modi-led government had been in favor of a 74% FDI cap for insurance companies as well as a 100% FDI in insurance intermediaries, since the past two years.

Besides, the insurance regulator was also in favor of a 100% 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% FDI would help infuse capital into the insurance intermediaries segment.