Insurance FDI raised to 49%—A step in right direction: Insurers says

India Infoline News Service | Mumbai |

The Union Budget announcements and efforts thereof will provide impetus to the insurance industry to widen the reach and distribution network

Finance Minister Arun Jaitley unveiled the Union Budget for 2014-15 speech in Lok Sabha today.
The FM said that fiscal prudence is of paramount importance and the Budget aims to lay down broad policy indications.
Anoop Pabby, Managing Director & CEO, DHFL Pramerica Life Insurance Co, said, “The Union Budget 2014 presented by the Finance Minister today, is a positive for the country, and shows some much needed fiscal practicality. The intent of the Finance Minister to strengthen and modernize regulatory framework in financial sector to meet challenges of a complex economy is welcome.
The increase in the FDI cap in insurance from 26% to 49% will bring in the requisite growth capital from foreign promoters and will help deepen penetration of insurance solutions in the Indian rural markets. Pabby further said.
Insurance companies such as AEGON Religare Life, Tata AIG General Insurance, Edelweiss Tokio Life, DHFL Pramerica Life and Tata AIG General said enhancing FDI in insurance to 49% is a welcome measure.
According to the insurers, this should help the insurance industry as a whole in terms of augmenting the capital inflows and also better practices from the foreign players, KS Gopalakrishnan, MD & CEO, AEGON Religare Life Insurance, said.
KK Mishra, MD and CEO, Tata AIG General Insurance says, “The announcement about 49% in Insurance Sector is a welcome initiative. Once approved, this would encourage foreign investment and will further augment free flow of knowledge and intellectual cross fertilisation, benefiting the insurance sector as a whole; right from product innovation, distribution & in building robust customer service mechanisms.”
Raising FDI limits to 49% in Insurance sector is a long awaited welcome step, from the point of view of three interested parties – the Insurance industry, International investors and the Indian citizen – ultimately the Indian economy. Deepak Mittal, MD & CEO, Edelweiss Tokio Life, said.
Insurance being a capital intensive industry, this provides a significant opportunity for greater penetration as well as product innovation suiting the needs of a larger ecosystem. For an industry that has a large ‘on ground’ infrastructure that combines branches, employees as well as agents at the grass root level, this could be the big ‘shot in the arm’ for the financial inclusion steps that the government has been driving. Penetration and inclusion will also benefit via proposals simplifying both the KYC norms and Demat accounts to a single unit across all financial products, Mittal added.
Increasing of this limit promises an immediate FDI inflow. For greater impact, the increase in limit should not be with any riders attached. Growth of insurance will also have the spillover benefit of increasing investments in Government Debt and Infrastructure.
Overall the reiteration of the commitment to rein in Fiscal Deficit at 4.1% in the budget displays a positive intent on fiscal discipline. What needs to be seen are the finer details of how the Finance Minister proposes to take the steps forward. There is also a well spelt out thrust on Infrastructure and investments in social sector. 
On the personal tax front, Pabby said that the increase in personal I-T limit to from 2 lakh to Rs 2.5 lakh and increase in threshold of exemption under 80C investment cap from Rs 1 lakh to Rs 1.5 lakh will put more disposable income in the hands of the individuals. This will also encourage individuals to go for more long-term savings plans (including insurance plans), that provide funds for long term infrastructure projects.”
KK Mishra further said, the Finance Minister the proposal of setting up four AIIMs and 12 government medical colleges will ensure improvement in the quality of medical education and will provide consumers with easy access to medical facilities. In the rural sector, investments in agriculture and MSME sectors were needed and encouraging private equity investments will prove to be a boon to the overall economic development of the Country, Mishra added.
Sujay Shetty, leader pharma and life sciences, PwC India said, Some good initiatives were announced in the budget across capacity and infrastructure building. The hike in Insurance investment limit to 49% will help both the patients and the Pharma industry. Free drugs and free diagnostics for all, sounds potentially promising for patients. We will have to see more details on this."
Overall, the Union Budget announcements and efforts thereof will provide impetus to the insurance industry to widen the reach and distribution network. We believe that with the Budget’s strong focus on small towns and rural areas, the end-customer will gain through the wider reach of insurance in these sections and territories, Mishra concluded.

Read more:

Highlights of Union Budget 2014-15
 

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