Insurance 2.0: After 100% FDI, distribution costs reset

The Indian insurance sector has seen a significant change with the government allowing 100% foreign direct investment. This move has led to a shift in the benchmark for general insurers from gross written premium to domestic gross direct premium income. The new benchmark will help reduce distribution costs, which were previously capped at 32.1%. This change is expected to trend towards 20% within five years, benefiting the sector. The reduction in distribution costs will likely have a positive impact on the insurance industry's profitability.

Why it matters

The increase in FDI limit to 100% is expected to bring in more foreign investment, which could lead to improved efficiency and competitiveness in the Indian insurance sector. This, in turn, could lead to lower distribution costs and higher profitability for

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