Fdi in Insurance India
FDI in Insurance
Introduction
The insurance sector in India used to be dominated by the state-owned Life Insurance Corporation and the General Insurance Corporation and its four subsidiaries. But in 1999, the Insurance Regulatory and Development Authority (IRDA) Bill opened it up to private and foreign players, whose share in the insurance market has been rising.
As a part of overall financial sector reforms, the Government set up the Committee for Reforms in the Insurance Sector in 1992. In its report released in early 1994, it recommended the opening up of the sector to private sector participation. This was done in 2000. Since then there has been rapid growth and share of insurance in total financial savings of the economy has improved significantly. The number of life insurance companies has increased from 13 at end March, 2003 to 18 at end March, 2008. Competition in the industry is increasing with new players trying to establish a significant presence. Currently the total insurance market in India is about US$ 30 billion, in which the element of FDI is US$ 0.5 billion. This is 1.6% of total insurance business in India. Foreign direct investment (FDIs) will increase in insurance sector by US$ 0.46 billion in next 2 years and likely to touch US$ 0.96 billion as it is still regulated.
Relevance of the topic
Currently, only 26% of FDIs is permitted in insurance sector. The total insurance business would touch US$ 60 billion size. If insurance sector is opened up to an extent of 49% for FDIs, it is expected that FDI’s contribution to insurance business would touch nearly US$ 2 billion. In this paper we will examine the advantages and disadvantages of FDI in the insurance sector.
Analysis
Insurance and FDI
Insurance penetration in India is lower than in many East Asian countries. But the penetration as a percentage of GDP has improved from 2.5 in 2005 to 4.0 in 2007 for life insurance in India Advantages of FDI in insurance Sector
1. Capital for expansion: FDI
Introduction
The insurance sector in India used to be dominated by the state-owned Life Insurance Corporation and the General Insurance Corporation and its four subsidiaries. But in 1999, the Insurance Regulatory and Development Authority (IRDA) Bill opened it up to private and foreign players, whose share in the insurance market has been rising.
As a part of overall financial sector reforms, the Government set up the Committee for Reforms in the Insurance Sector in 1992. In its report released in early 1994, it recommended the opening up of the sector to private sector participation. This was done in 2000. Since then there has been rapid growth and share of insurance in total financial savings of the economy has improved significantly. The number of life insurance companies has increased from 13 at end March, 2003 to 18 at end March, 2008. Competition in the industry is increasing with new players trying to establish a significant presence. Currently the total insurance market in India is about US$ 30 billion, in which the element of FDI is US$ 0.5 billion. This is 1.6% of total insurance business in India. Foreign direct investment (FDIs) will increase in insurance sector by US$ 0.46 billion in next 2 years and likely to touch US$ 0.96 billion as it is still regulated.
Relevance of the topic
Currently, only 26% of FDIs is permitted in insurance sector. The total insurance business would touch US$ 60 billion size. If insurance sector is opened up to an extent of 49% for FDIs, it is expected that FDI’s contribution to insurance business would touch nearly US$ 2 billion. In this paper we will examine the advantages and disadvantages of FDI in the insurance sector.
Analysis
Insurance and FDI
Insurance penetration in India is lower than in many East Asian countries. But the penetration as a percentage of GDP has improved from 2.5 in 2005 to 4.0 in 2007 for life insurance in India Advantages of FDI in insurance Sector
1. Capital for expansion: FDI
References: 1. http://www.indianmba.com/Faculty_Column/FC407/fc407.html - Overview of Insurance Sector in India - Dr. Vijay Pithadia 2. http://www.rbi.org.in/home.aspx 3. http://www.irda.gov.in 4. http://www.dipp.nic.in/ 5. http://www.business-standard.com 6. http://www.licindia.in/