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Straight from the Specialists

Time for a relook at FDI in insurance intermediaries


(Any opinions expressed here are those of the author and not of Thomson Reuters)

Insurance companies in India have an FDI limit of 26 percent, which may be revised upwards in the coming months. The industry requires funds to grow and the revision can be an enabler, but the process may take some time as it requires legislative approval and there seems to be some opposition to the move.

Since the industry is still in its nascent stage, the insurance regulator also places the same FDI cap on insurance intermediaries such as brokers and web aggregators, severely limiting their ability to raise funds to grow their business.

I will attempt to elaborate why this cap should be done away with completely.

The need to scale

Today’s entrepreneurs are ambitious and want to run businesses which have attractive, if not massive, scale. And in a growing market like India, the scale is available but tapping into it can be an expensive affair.

Successful online ventures that offer their services in India have all received generous backing from venture capital (VC) funds. Because of this, they have been able to scale up their businesses and offer a far superior value proposition to the end consumer.

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