India’s recent initiative to liberalize its insurance sector could finally pave the way for foreign insurance firms to enter an underdeveloped market. However, foreign insurers must confront several challenges, including the nation’s limited infrastructure capability, competition posed by state-owned insurers, along with high operating and investment expenditures.
The Indian Parliament's plan to raise direct foreign investment limits from 26% to 49% in insurance businesses, should it be approved in December, represents a significant milestone in the country’s insurance industry. This follows the sector's initial opening to private and foreign investors back in 1999. Over the years, the insurance industry has grown at an impressive average rate of 25% annually, as highlighted in a recent report by PricewaterhouseCoopers.
Several underlying factors are propelling this liberalization, primarily rooted in essential developments within the insurance market of the country. The introduction of foreign capital and expertise is viewed as crucial for boosting the growth of product distribution and promotion strategies.
Before this partial market opening, the insurance sector had been monopolized by a handful of state-owned companies. Due to this lack of competition, choices for customers were largely restricted to endowment and money-back life policies, alongside fire and property insurance, according to insights from PricewaterhouseCoopers.