Consultancy firm PwC said the move would see up to Rs 1 lakh crore in potential investment into the sector and take the country into the top league. Another consultancy firm Deloitte sees the move triggering selective consolidation since players with a strong capital base may have access to a war chest to acquire weaker players.
"It is heartening to see the new Insurance Bill being cleared by the Cabinet today. While one will await its passage by Parliament, there are other important provisions in the Bill over and above the capital structure that will benefit companies and therefore customers," ICICI Lombard General Insurance Managing Director and Chief Executive Bhargav Dasgupta told PTI.
Earlier during the day, the Cabinet gave the go-ahead to hike FDI in insurance to 49 per cent with a rider that management control would remain with domestic promoters.
"Insurance penetration is abysmally low in our country and we need a lot of capital to reach out to the uninsured population. This move will facilitate insurers' entry into the hinterland in a major way," Reliance General Insurance Chief Exectutive Rakesh Jain said. He also said it would help bring in new technology and better servicing for customers.
Star Health and Allied Insurance Company Chairman and Managing Director V Jagganathan also welcomed the move saying the move would help insurers maintain solvency margin without any issues.
"Moreover, increasing FDI limit in different sectors will enable us to work better in a country like ours that is growing fast. This decision will help insurance business grow in small towns thereby increasing penetration," he said.
"We welcome the Cabinet's approval to increase FDI limit in insurance from 26 to 49 per cent with full Indian management and control, as it will help in attracting the much needed long term capital for the sector which can have multiplier effect on the state of economy, especially in meeting the huge infrastructure financing requirements," CII Director General Chandrajit Banerjee said.
PwC India's Anuraag Sunder said, "Potential investment in the sector could be anywhere in the range of Rs 80,000 crore to 1,00,000 crore. This may be just be the cure for pushing the country into the league of top tier markets, beyond the 12-year old 'emerging markets' category."
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