The Insurance broking industry is about to take a major change, once the government permits 100% FDI. The finalized decision is pending. That said, let us look into the Pros and Cons of allowing 100% FDI in the insurance broking sector.
The current contribution of the insurance sector in India’s GDP is just 3.49%. The involvement of more foreign investors will help GDP growth. More importantly, it will help insurance reach more people. Rural India too needs insurance coverage!
Investment is a much-needed relief to many firms. Increased FDI will bring in more capital for technology adoption, expansion, etc. Growth happens once the inflow of cash comes as investments.
As foreign involvement in a broking firm increases, expect new strategies, improved processes, and advanced tools for operations. As a result, it will improve the working environment of the firm, and employees will get better training to service customers.
Increased Tax Revenue
It’s certain, government revenues are to increase because of FDI. Also, tax from the insurance industry will increase, and this will, in turn, help the Indian economy. The insurance industry is set to reach US$ 280 billion by 2020. Allowing 100% FDI will fuel this process.
Conservative Business Under Threat
Small-scale organizations may be forced to merge or vacate the market due to the competition. Likewise, brokers who follow incompetent processes may fall. They will be forced to move away from excel and documents based operations, to good insurance handling applications to keep up.
Certain senior officials from insurance companies believe agents are the number one beneficiaries under the proposed FDI strategy. Older and established firms fear being overtaken through their foreign partners. So, It is high time for established emerging brokers/agents to step up the game.