The current 500 million dollar of FDI investments in the total domestic insurance market of 30 billion dollars will almost double to 960 million dollars, even at current ceiling of 26 per cent in FDI, says the Associated Chambers of Commerce and Industry of India. An investment of 217.97 million dollars of FDI in Janaury-May is not too insignificant, Assocham says. Chamber president Sajjan Jindal said if the FDI limit is increased to 49 per cent from the present 26 per cent, they expect its component in the insurance business to grow to two billion dollars by 2010.
With the domestic insurance sector growing by an average of whopping 200 per cent annually, the total business is projected to touch 60 billion dollars by 2012, Assocham says.
India's insurance market in terms of penetration, at only 3.1 per cent, is well behind the 12.5 per cent in the United Kingdom, 10.5 per cent in Japan, 10.3 per cent in South Korea and 9.2 per cent in the United States, the study says.
Currently, FDI represents only Rs 827 crore of the Rs 3,179 crore capitalisations of private life insurance companies, it adds.
The study argues that increase of FDI in insurance would increase its penetration in the country, where premium is abysmally low at about three per cent of GDP against global average of eight per cent.
Mr Jindal says opening the insurance sector to more FDI could also pave the way for doing away with it in many other sectors of the economy such as in realty, and also help meet the country's long term capital requirements to fund infrastructures.
With its capacity of raising long term capital from people for most of whom it is the only avenue where they put in their money for as long as 30 years, an increase in FDI limit in insurance could further boost growth of the Indian economy, the study says.
Nearly 29 insurance companies are taking part in the current pie of 30 billion dollars of domestic insurance business. Of these 14 are in private life insurance sector, nine in private non-life insurance sector and six public sector insurance companies.