IRDAI Chairman calls for 100% foreign direct investment in insurance sector

At the Business Standard’s annual BFSI event, the Insurance Regulatory and Development Authority of India’s (IRDAI) Chairman, Debashish Panda called for 100% foreign direct investment (FDI) in the insurance sector to reach the goal of ‘insurance for all’ by 2047, for which a lot of capital is needed.

Panda said that achieving universal insurance will be crucial to India’s journey towards a ‘Viksit Bharat’ by 2047. He added, “When we are talking of Viksit Bharat by 2047, we must have a fully insured society, a fully banked society, and a fully pensioned society.”

He described insurance as a capital-intensive sector with India needing more market players to increase insurance penetration.

The country gradually opened its insurance sector by allowing private and foreign investment in 2000, currently, up to 74% FDI is permitted in general, life and health insurance.

“Perhaps it is time to open up the insurance sector for 100 per cent FDI so that there could be more players who want to come to India to operate on their own terms without trying to look for an Indian partner. If somebody comes at 74:26, that is also fine. But opening up the sector for 100% FDI will attract more investments to come into the country. If the FDI route is also opened, that will just augment the domestic investment; otherwise, the domestic investment may get crowded,” said Panda.

The IRDAI is focused on technology after regulatory revamp, and pricing has also been looked at so that insurance can be affordable. However, the regulator wants the market to determine pricing but has built safeguards to protect the policyholders. For this, it introduced a limit on expenses at the company level allowing companies to decide how they want to remunerate their distributors and management.

Going forward, IRDAI aims that there will be more and more personalised pricing possible. “The millennial population will demand products, which we call do-it-yourself. So these kinds of personalised and hyper-personalised offerings, better risk pricing, are the modern trend, and it is only possible with further digitisation and technology,” explained Panda.

Discussing the reinsurance sector, Panda said, “We have also made a series of changes as far as the reinsurance regulations are concerned. And we are opening the door for more domestic reinsurers to set up shop. We have got one application that is under process for domestic reinsurance.

“We are looking at the other big investors to invest in the reinsurance space, who are already in the primary insurance space. We are also looking at cross-border insurers, who are operating from their jurisdiction, to come to India, either become a foreign reinsurance branch, become a domestic investor, or set up shop in the Gujarat International Finance Tec-City.

“Insurers also retain very little risk on their books, so that rationalisation is also happening now. But at the same time, the creation of reinsurance capacity is a priority. The new regulations are moving towards that. And hopefully, in the near future, we’ll see more reinsurance players entering the domestic market.”

Embracing technology along with implementing strong cybersecurity measures, according to Panda, is crucial. He urged that the claims experience for customers must be smooth and satisfying, ensuring an improved journey throughout the process, which companies must prioritise and continuously enhance.