100% FDI in insurance to attract capital flow, innovative products

Bengaluru: The Union Cabinet on Friday approved a landmark decision to permit 100% foreign direct investment (FDI) in the insurance sector. This pivotal reform is set to attract substantial global capital, enhance market competitiveness, and significantly deepen insurance penetration across the country.

This reform brings clarity, confidence and long-term capital into a growing sector that plays a central role in strengthening financial security. “Global expertise and sustained investment can help accelerate innovation, improve consumer experience and expand access across the country. The move is well-positioned to raise the overall quality of service, unlock significant new capital and support India’s long-term vision for broader insurance coverage,” said Sarbvir Singh, Joint Group CEO, PB Fintech.

The move underscores the government’s commitment to economic liberalisation and creating a robust, investor-friendly ecosystem. 

Narendra Ganpule, Partner and insurance industry leader, Grant Thornton Bharat said the transition to 100% foreign ownership will eliminate previous complexities associated with finding domestic partners and is expected to attract new global players, while allowing existing foreign participants to increase their stakes and autonomy.

Key benefits

Increased capital inflows: The reform is projected to bring in significant foreign capital, providing the necessary solvency and long-term investment for the growth of life, health, and general insurance segments.

Enhanced competition and innovation: A more open market is expected to foster greater competition, leading to innovative product development, superior customer service standards, and the adoption of global best practices and technology.

Deepened insurance penetration: Greater investment and competition will accelerate efforts to make insurance products accessible to a wider segment of the Indian population, contributing to financial security and national economic resilience.

Job creation: The expansion of the sector will lead to significant job creation in underwriting, sales, claims management, and associated services. 

“Allowing 100% FDI is a strong signal of confidence in the sector’s potential and commitment to economic reforms. The move will not only boost foreign investments, but also fundamentally improve the quality and reach of insurance services for every Indian citizen,” he said.

Anubhav Srivastava, Managing Partner, Aryzen Capital Advisors, said the move will lead to competition in the insurance sector which will only benefit the customer. “The 100% foreign ownership will result in better technology, and innovative products for the common man. We can also expect lesser premiums for policyholders in some cases and better risk management.”

Ganpule further added that the new move could result in foreign partners in the existing insurance JVs to raise their stakes or even buy out Indian partners.