The Indian insurtech industry is at a critical juncture with the lifting of all caps on foreign investment, but are domestic players and insurance startups bullish or bearish about the entry of new competition from multinational rivals?

The Union Budget 2025 opened the insurance sector to 100% foreign direct investment (FDI), removing the 74% cap, with the condition that the premium funds remained in India.

“This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” Finance Minister Nirmala Sitharaman said in her budget speech.

FDI, which allows companies from one country to invest in businesses in another country, has seen India progressively liberalising the regulations since 1991 to drive economic growth. The year 2020 was the only exception when stricter screening policies were levied to prevent opportunistic takeovers after the COVID-19 pandemic.

The lifting of the cap on FDI will accelerate India to be the sixth-largest insurance market within a decade, surpassing Germany, Canada, Italy, and South Korea, according to watchdog Insurance Regulatory and Development Authority of India (IRDAI). The move, aligned with the government’s ‘Insurance for All’ mission for 2047, will also drive digital transformation in the sector.

Along the course of India’s dream run to be a robust economy powered by digital infrastructure, the fintech sector is expected to create a $2.1 Tn opportunity by 2030. Inc42’s State of Indian Fintech Report 2024 projected the insurtech space to be a $307 Bn market by this time, averaging a 17% growth rate.

“Raising the FDI limit to 100% is a game-changer for insurtech startups, unlocking capital, technology, and expansion opportunities,” said Ankit Agrawal, chief executive and founder of InsuranceDekho. In fact, industry experts Inc42 talked to were largely unanimous in calling the move a “great initiative” that will drive fresh funds into insurance.

Major

© Inc42