Rs 60,000cr inflow likely in 5 years to insurance sector

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26 Aug, 2025 12:21

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The foreign investment limit hike in insurance to 49 percent is likely to result in capital inflows of up to Rs 60,000 crore over the next five years, SBI said in a research report `Ecowrap'.

"The FDI limit hike could result in inflows of Rs 40,000 crore to Rs 60,000 crore over five years and immediate inflows of around Rs 20,000 crore," the report stated. The insurance industry over the last 14 years (since it was opened to FDI and private players) has attracted over Rs 33,749 crore of capital and over the next 5-10 years it requires as much, if not more, in fresh capital to be able to fund its growth and expansion, the report said.

During 2000-01 to 2013-14, the life insurance business registered a growth of 1 percent in total premium and 21 percent in new business premium collections and non-life segment grew by 16 percent.

This growth was driven by entry of new players with significant growth aspirations and capital commitments, which showed in the improvement in both insurance penetration and density of India, it said.

However, compared to the developed countries like the US (7.5 percent), UK (11.5 percent) and South Africa (15.4 percent), the Indian insurance industry is still under-developed in terms of penetration (3.90 per cent in 2012-13).

"Most of the private players have accumulated losses, not due to inefficiency but due to the nature of this business. For further expansion, the insurer needs capital, which is a challenging task for the promoters to infuse," it said.

The report said by virtue of Section 24 of the PFRDA Act, the increase in foreign limit in pension funds under PFRDA is implicit if foreign investment limit in the insurance sector is hiked to 49 percent through the FIPB route and the passage of Insurance Bill opens the pension sector also for foreign investment.