The government’s move to raise the foreign direct investment (FDI) cap in the life insurance sector to 49% from 26% will lead to cheaper insurance products and better services for customers, as more players are likely to enter the sector. “Raising FDI cap will send positive signals to foreign investors and will encourage new players to enter the Indian insurance market,” Puneet Nanda, executive director, ICICI Prudential Life Insurance told HT. “Increased competition will lead to the introduction of newer and lower-priced products and better service from insurance firms.”

Experts feel there is ample oppurtunity for new player in the country, where the market is currently controlled by 24 firms.

“More companies will enter the sector because India is an underpenetrated country when it comes to life insurance products,” said Vibha Padalkar, executive director and chief financial officer, HDFC Life. “Along with lower prices, customers will also see new products hitting the market.” 

Raising the FDI cap will provide the much required capital to insurance companies that have been facing slow growth due to a volatile market and sluggish economy. First-year premium collections of 24 insurance companies fell 9% to Rs. 114,233 crore in 2011-12 against Rs. 125,826 crore in the same period of the previous fiscal year.