Insurance industry favours FDI cap to be raised to 49%

New Delhi, Oct 14: Mjaority of insurance companies feel that foreign investment limit of 26 per cent should be raised to 49 per cent considering the huge Rs 400-500 crore fund infusion required in the initial years.

“It is felt that the present equity cap of 26 per cent in a private insurance company is miniscule and can weaken the future prospects. Seventy per cent of the respondents are of the view that foreign equity should be increased to 49 per cent,” FICCI said in a survey, which covered almost all the existing and new insurance (both life and non-life) players.

Such companies may reach break-even point in not less than 7-10 years, which essentially meant that industry needed huge funds for capital investment of Rs 400-500 crore, it said adding to tackle such a problem, multi-national companies, which are technically and financially more equipped, should step in to handle markets like India.

It said 90 per cent of the insurance companies expressed hope on the bank assurance saying that it would emerge as a vital component for the purpose of distribution, even as 70 per cent of them said the Indian banks lacked the expertise to handle insurance products.

Ninety per cent of the insurance companies said rural market offered viable business opportunities, while another 70 per cent felt that definition of rural sector by insurance regulator was not in consonance with census definition.

It found that 80 per cent of the respondents felt that regular collection of premiums was a problem for the rural sector, while 60 per cent viewed that claim settlements could also pose a problem and for another 70 per cent, the present mindset of rural consumers had to change.

It said 50 per cent of the companies were trying to woo customers by giving tax benefits, while the need to change the traditional customers’ mindset of buying policies for availing tax benefits was only partially felt.

All the respondents felt that insurance companies should be allowed to carry forward business for offsetting taxable surplus in the subsequent years, it said.

— PTI