IRDAI Chairman calls for 100% FDI in insurance sector, unified licence

IRDAI’s Chairman Debashish Panda called for 100% foreign direct investment (FDI) in the insurance sector during an event recently.

100% FDI in insurance sector

“Perhaps it is time to open up the insurance sector for 100% FDI so that there could be more players who want to come to India to operate on their terms without trying to look for an Indian partner,” Debashish Panda commented.

At present, the FDI ceiling for the sector stands at 74%; increasing it to 100% would not only increase the insurance penetration in the country but would also attract more investment.

India’s insurance penetration rate stood at 4% in 2023, lower than the global average of 6.2%.

“If somebody comes at 74:26 (current FDI ceiling is 74%), that is also fine. However, opening up the sector for 100% FDI will attract more investments to come into the country. If the FDI route is also opened, that will just augment the domestic investment; otherwise, the domestic investment may get crowded,” Panda remarked.

Unified license

A composite license will allow insurers to provide life, health, and general insurance all under one firm. At present, life insurance companies can only sell life insurance products, and general insurance companies can only offer products ranging from health to fire.

When the Insurance Regulatory and Development Authority of India (IRDAI) first proposed the unified license, it was supported by a panel of lawmakers, provided that the entities eligible for the license meet adequate capital and solvency requirements.

Technological and pricing revamp

After the regulatory update, the IRDAI will focus on technological and pricing revamps. 

“The millennial population will demand products, which we call do-it-yourself. So these kinds of personalised and hyper-personalised offerings, better risk pricing, are the modern trend, and it is only possible with further digitisation and technology,” Panda remarked. 

Changes in the reinsurance sector

Panda revealed that the insurance regulator has made a series of changes concerning the reinsurance sector. Further adding that the IRDAI is opening the door for more domestic reinsurers to set up shop. 

“We have also made a series of changes as far as the reinsurance regulations are concerned. And we are opening the door for more domestic reinsurers to set up shop. We have got one application that is under process for domestic reinsurance,” IRDAI Chairman highlighted.

“We are looking at the other big investors to invest in the reinsurance space, who are already in the primary insurance space. We are also looking at cross-border insurers who are operating from their jurisdiction to come to India, either to become a foreign reinsurance branch, become a domestic investor, or set up shop in the Gujarat International Finance Tec-City,” Panda revealed.