The Department for Promotion of Industry and Internal Trade (DPIIT) has notified 100% Foreign Direct Investment (FDI) in insurance intermediaries, including insurance brokers, insurance consultants, corporate agents, third-party administrators, surveyors and loss assessors, among other such entities. The share of FDI allowed in insurance companies continues to be capped at 49%.
The change in FDI policy comes almost a year after finance minister Nirmala Sitharaman announced the move as part of the union budget 2019. Earlier, foreign ownership in intermediaries was capped at 49%.
The DPIIT notification states that insurance intermediaries that have a majority shareholding of foreign investors should be incorporated as a limited company as per the Companies Act 2013. Further, it requires that a resident Indian citizen be appointed as the chairman of the board of directors, CEO, managing director or the principal officer at the intermediary.
In September last year, a notification issued by the central government removed the cap on foreign investment in the sector while the Press Note 1 (2020) issued by the DPIIT on February 21 introduced the change in FDI policy.
The current move is likely to open up the entry of foreign brokerage firms in India through strategic partnerships, and increase the penetration and distribution of insurance products in India. The move will also help online insurance brokerage platforms in the startups space raise additional funds.