The Govt has proposed to hike the Foreign Direct Investment – FDI limit from 49% to 100% in case of insurance intermediaries. The insurance intermediaries include the Insurance brokers, Surveyors & loss assessors, web aggregators, Third party administrators (TPA) & Insurance repositories. The govt. is also considering to raise the FDI limit in the insurance co’s from 49% to 74% as per the budget 2019 indicators.
Who are the insurance intermediaries:
Surveyors & Loss assessors: There are over 10000 surveyors & loss assessors in India who assess the losses reported with the various insurance co’s. most of the surveyor & loss assessors work individually as a one man show but there are some corporate surveyor & loss assessor firms also. Few big co’s like cunnigam Lindsey & puri Crawford are also operating in India with their Indian partners but have only 49% stake as the existing norms don’t allow more than 49% FDI in surveyor & loss assessor firms. But with the FDI limit being raised to 100% now, lot of foreign loss assessing co’s are likely to enter the Indian market.
At present there is a huge gap between the technology used by the insurers and the surveyors & Entry of foreign players will bring in the latest technology and advanced digital platform used by surveyors worldwide. An FDI hike could also boost use of newer technologies, and will help in the long-term and holistic development of the industry. according to industry experts.
Web aggerators: They are the licensed firms allowed to sell the insurance products through on-line plate form. With the increase in digital awareness the on-line purchase of motor & health insurance policies is increasing day by day & role of the agents is diminishing with every passing year.
Few of the web aggregators like policy bazaar, myinsurance club etc. are growing at very fast pace. At present there are about 30 web aggregators operating in India & now with the application of 100% FDI, some big foreign player are looking forward to enter the Indian market
TPA’s: Previously all the claims were settled in-house by the insurers but now most of the insurance co’s have engaged the third party administrator to handle their claim under the health insurances policies. the change in FDI norms will attract significant investment in the sector and enable adoption of global best practices and lead to significant job creation both directly and indirectly
Insurance Brokers: To act as insurance broker, one has to obtain a license from the the IRDA. The role of the insurance broker is to sell the products of insurance co’s physically. The agents are allowed to work for only one insurer whereas the broker can tie-up with multiple insurers & guide their clients to buy the most suitable product as per the individual needs.
At present there are over 400 brokers in india but are mainly operating in big cities only but An increase in FDI to 100 percent FDI ownership for insurance intermediaries is going be a game-changer as high quality global capital and expertise flows into the Indian insurance industry. It can enable companies to expand operations and create more jobs.“The announcement of 100% FDI will attract global insurance distributors to enter the vertical without worrying about finding a suitable local partner and ownership and control issues,”
Insurance repositories: At present there only 4 insurance repositories in India & NSDL is one of them. An Insurance Repository (IR) is a company licensed by IRDA for maintaining data of insurance policies in electronic form on behalf of Insurers. They will hold electronic records of insurance policies issued to individuals and such policies are called “electronic policies” or “e Policies”.
In future, IRDA is likely to make holding policies in electronic form mandatory & the capital flow through the 100% FDI route is need of the times.
There are other firm like IMF’s, ISNP’s & PO’s which also fall under the purview of insurance intermediaries & with 100 percent FDI norms in surveyor & loss assessor firms as well the other insurance intermediary verticals, the big funds are likely to flow in. Most of the indian insurers have welcomed this move of the Government in 2019 budget.
The public sector insurers were also expecting some capital infusion to ramp-up their solvency margins but no provision was kept for the same.