The government’s proposal to open the insurance broking industry to 100 per cent foreign direct investment is welcome, an idea also feted by the insurance broking fraternity. The broking industry and other intermediaries were reportedly brought by the insurance regulator willy-nilly into the ambit of the 49 per cent FDI cap that was applicable to the insurance industry. The industry itself feels there is a need for the latest technology and best practices for it to grow to offer a variety of services. The insurance industry is estimated at $13 billion while the broking industry is a mere $2 billion, with just four-five big firms. There is plenty of room for everyone.
Foreign broking firms are keen to come in as India, China and other Asian and African countries are seeing significant growth compared to the US and Europe, which are near saturated markets. But they are not interested in coming in as minority partners if they are to impart technology. If they bring in their best practices, their Indian counterparts would be forced to change to international standards and offer better customer service, more research and industry reports, etc. All this is lacking today.
There is no fear that they would raise costs in the industry. Even luxury car makers like Mercedes-Benz and BMW are bringing in low-cost models to cater to the price-sensitive Indian market. It is also unlikely that 100 per cent FDI in the broking industry would pave the way for the same in the insurance industry because that is a hot potato the Narendra Modi government would not want to tamper with in the current political scenario.
