IRDAI has issued a circular in which it has increased the limit of Foreign Direct Investment (FDI) in insurance distribution from 26% to 49%. Like insurance companies, insurance agents, corporate agents and insurance brokers too can attract investments in their distribution business.
However, insurance distributors having over 50% revenue coming from non-insurance distribution activities like mutual funds and tax free bonds are not allowed to raise such investments.
“The Insurance Law Amendment Act, 2015 provided for increase in the foreign investment cap in the India Insurance Companies to 49% from 26%. These guidelines are also made applicable to insurance intermediaries as defined in the IRDA Act, 1999 such as brokers, third party administrators, surveyors and loss assessors etc. However, in case of an insurance intermediary having more than 50% of its revenue from non-insurance activities, these guidelines shall not be applicable.”
Last year, IRDAI has formed a ten-member committee to look in the matter related to FDI in insurance broking, distribution, TPA etc. The committee had submitted its report after examining the case for increasing FDI in insurance entities, evaluating implication of this on industry and studying the international practices.
Industry experts said that allowing 49% FDI in insurance intermediaries will bring technology and innovations in the insurance distribution space.
The guidelines come into force with immediate effect.