The Department for Promotion of Industry and Internal Trade (DPIIT) has amended the foreign direct investment (FDI) policy to allow 100% FDI for insurance intermediaries, which includes insurance broking, insurance companies, third party administrators, surveyors and loss assessors.

Insurance intermediaries are those brokers or agents who liaise between the insurance companies and customers. According to the policy, FDI for insurance companies is still capped at 49%.

The government's decision to ease FDI norms will enable foreign brokerage companies to buy stake in Indian companies. This move will bring the best global practices into the country to include new insurance products and selling strategy. As a result, the right kind of product will be sold to the right client.

Nirmala Sitharaman
Sitharaman is ranked 34th who is a newcomer on the Forbes most powerful women list.Reuters

In the Union Budget last year, finance minister Nirmala Sitharaman announced that 100% FDI will be permitted for insurance intermediaries. As per the new policy, no Indian company will allow "aggregate holdings" by way of "total foreign investment" in its equity shares by foreign investors, including portfolio investors, to exceed 49 per cent of the paid up equity capital of such Indian insurance company.

The policy further states that insurance intermediary with majority shareholding of foreign investors will have to be incorporated as a limited company under the provisions of the Companies Act 2013. At least one from among the chairman of the board of directors or the Chief Executive Officer (CEO) or principal officer or MD of the company should be a resident Indian citizen. The intermediaries are required to take prior permission of the authority concerned before repatriating dividend.

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Also, any non-insurance company, for instance, a bank with more than 50% revenue from non-insurance business will have to adhere to respective FDI limits for that particular sector.

Despite global headwinds, FDI into the insurance sector continues to remain robust. Foreign intermediaries are further not permitted to make payments to any foreign group or promoter or subsidiary or interconnected or associate entities beyond what is mandated.

Global Foreign Direct Investment (FDI) flows slid by 13% in 2018, to $1.3 trillion from $ 1.5 trillion the previous year - the third consecutive annual decline, according to UNCTAD's World Investment Report 2019. Sitharaman proposes to further consolidate the gains, in order to make India a more attractive FDI destination.