The finance ministry has asked the department of industrial policy and promotion (DIPP), to review the definition of ‘insurance’, confirmed three senior officials familiar with the development. The review will help companies in related activities such as insurance broking and intermediaries bring in foreign direct investment through the automatic route.
"The current definition of insurance in the FDI regulations is very narrow and activities like intermediaries and broking are not included," a senior official of a top insurance broking firm.
Under existing guidelines, foreign direct investment up to 26 per cent is permitted in the insurance sector. But the DIPP — the nodal agency for forming policies on FDI — considers only life and general insurance companies as part of the insurance sector. In contrast, the IRDA includes intermediaries, insurance brokers and re-insurers as a part of the sector.
As a result, only life and general insurance firms can get in FDI up to 26 per cent through the automatic route. Other related firms such as insurance brokers and intermediaries have to seek clearance from the Foreign Investment and Promotion Board.