In its response to the finance ministry with respect to increase in FDI limit in the insurance brokerage firm from the current level of 49 per cent, the IRDAI said all major international insurance brokers such as Marsh, JLT, Willis and Howden are already present in the country as the capital required for undertaking such activity is very less.
The increase in foreign direct investment (FDI) limit to 100 per cent will not result in significant inflow of foreign capital. According to estimates, the total capital infusion by three brokers after increasing the FDI limit is a mere Rs 4.78 crore.
The government is considering proposal to allow 100 per cent FDI in insurance broking and has set up a committee comprising secretaries of department of economic affairs, department of financial services and department of industrial policy and promotion (DIPP).
The IRDAI has also argued that there is no dearth of capital and Indian investors are also looking at avenues to invest.
FDI in insurance sector is restricted to 49 per cent. However, the government allows 100 per cent foreign investment for other financial intermediaries.
Industry experts are of the opinion that the insurance sector is being impacted due to weak distribution networks.
According to the Economic Survey, life insurance penetration was 2.72 per cent and general insurance penetration was 0.77 per cent. Insurance penetration, which is the ratio of premium underwritten in a given year to the gross domestic product (GDP), in India increased to 3.49 per cent in 2016-17 from 2.71 per cent in 2001.
The measure of insurance penetration and density reflects the level of development of the insurance sector in a country. While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium to population (per capita premium).
The insurance density rose to USD 59.7 in 2016 as against USD 54.7 in 2015 while insurance penetration remained unchanged at 2.72 per cent 2016, as per the latest Insurance and Regulatory and Development Authority of India data.