New Delhi, Feb. 5: The government has allowed foreign institutional investors (FIIs) and non-resident Indians (NRIs) to invest in the insurance sector, while retaining the foreign investment cap at 26 per cent.
In case of insurance companies, the 26-per-cent cap will include foreign direct investment (FDI) and the money put in by FIIs and NRIs, a press note by the department of industrial policy and promotion (DIPP) stated.
The guidelines notified today specify four sectors where insurance-related foreign investment can come through the automatic route. They are insurance companies, brokers, third-party administrators (TPAs) and surveyors. The decision will come into force with immediate effect.
The DIPP has also defined each of the four sectors; most of these definitions have been based on the rules prepared by the Insurance Regulatory and Development Authority (IRDA).
Brokers are entities arranging contracts with insurers or reinsurers on behalf of their clients.
TPAs help in facilitating health insurance claims on behalf of insurers.
Surveyors and loss assessors provide technical services to insurance companies.
All these entities have to get a licence from the IRDA to operate in the country.
The relaxation falls short of the demand of the insurance industry, which is pleading for a hike in the FDI cap to 49 per cent.
After a cabinet meeting in July last year, commerce minister Anand Sharma had said that foreign ownership in insurance firms would be raised to 49 per cent. However, the announcement seemed more of a declaration of intent as the cap can only be changed through legislation.
The insurance laws amendment bill, which seeks to raise the limit, is pending in Parliament since 2008 and is unlikely to be taken up in the ongoing session because of the absence of political consensus.
Meanwhile, state-run LIC has outperformed its peers in the private sector in premium collection by recording a 32 per cent growth during the nine months ended December of this fiscal.