The Union budget has paved way for new-age insuretechstartups to raise funding from global investors by relaxing the Foreign Direct Investment guidelines in the sector. The Finance Minister said 100% foreign direct investment will be allowed for insurance intermediaries and the move will benefit insurance aggregators and insurance broking startups.
“This was a long standing demand from the industry and will enable the sector to attract high quality global capital,” said Anik Jain, chief executive officer, Symbo, an insurance broking startup. Industry insiders pointed that the government is seriously looking for ways to expand insurance coverage in the country and take it to rural India. While it has started insurance schemes directly for the poor, without capital investments private insurers cannot bridge the last mile gap.
“Allowing 100% FDI in insurance intermediaries should open fresh opportunities for foreign investment in this category. Previously the main challenge was whenever had a term sheet from a global investor we had to look for domestic investors to chip in as well which made the fund-raising a long drawn process,” said Premanshu, chief executive officer at online insurance marketplace Coverfox. The Mumbai-based company had earlier closed a $22 million funding round led by International Finance Corporation and Transamerica last year.
“This is the first step, now whether early-stage startups in the insurance sector will be able to leverage it and get big pocketed foreign investors onboard depends on the management bandwidth,” said Mallesh Reddy, co-founder and chief executive officer, Insuremile.