Foreign Direct Investment in Insurance Sector: A Key for Better Insurance Penetration

Abstract

One of the most attractive developments during the last two decades is the brilliant growth of Foreign Direct Investment (FDI) in the global economy. Foreign direct investment is major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of lower wages, special investment such as tax exemptions, etc. The insurance sector has been fast developing with substantial revenue growth in insurance market. FDI in insurance would increase the penetration of insurance in India, FDI helps India in long term capital requirement to develop the infrastructures. Insurance sector is a booming industry in India with both National and International players competing and growing at rapid rate. Insurance Regulatory and Development Authority (IRDA) is in favour of an increase in foreign equity capital in the insurance joint venture. The public sector Insurance companies have continued to dominate the insurance market. India is among the most promising emerging insurance markets in the world. However the penetration of insurance coverage for both life and nonlife insurance is still very less and registered at 3.69% in 2019. The main objective of this paper is to know the benefits of foreign direct investment in insurance sector, and to know the government initiatives regarding insurance sector.