The existing FDI limit is 49 per cent. "Insurance tech has also generated high investor interest in recent years with companies like Policy Bazaar, Acko raising high amounts of FDI", said Divam Sharma, Co-founder, Green Portfolio, SEBI Regd.

Life insurance penetration in the country is 3.6 per cent of the GDP, way below the global average of 7.13 per cent, and in case of general insurance, it is even worse at 0.94 per cent of GDP, as against the world average of 2.88 per cent.

The Insurance Act 1938 will be amended to "increase the permissible FDI limit from 49% to 74% in insurance companies and allow foreign ownership and control with safeguards", the finance minister said in her Budget speech.The FDI limit was fixed at 26% when the insurance sector was privatised in the year 2000 and this was then raised to 49% in the year 2015.

Nirmala Sitharaman stressed that the government plans to allow foreign ownership and control with safeguards in insurance sector. Further, Wagh added that ICICI Prudential Life insurance is also a good buy.

The government has already allowed 100% foreign investment in insurance intermediaries such as brokers, consultants, third-party administrators, surveyors and loss assessors.

The latest move to raise FDI limit in insurance companies will help increase avenues to bring in capital inflows, says Shanai Ghosh, CEO of Edelweiss General Insurance. FDI is a major driver of economic growth and an important source of non-debt finance for the economic development of the country. The policy would give a clear roadmap for disinvestment in strategic and non-strategic sectors.

Policyholders in tier II and tier III cities are also likely to get a leg up via this move, as the funds infused are expected to help in bridging the demand-supply gap in insurance.

According to Prayesh Jain, Lead Analyst, Institutional Equities, YES Securities, the move could impact flows in the segment where ICICI Pru Life Insurance and SBI Life have the highest share.

At just about 4%, India has one of the lowest insurance coverage ratios among the most populous nations and this amendment is likely to put the industry back on the growth track from the present stagnation period.

HDFC Life managing director and CEO Vibha Padalkar said FDI increase in insurance, continuation of the disinvestment program and ease of tax compliance are welcome steps. "In addition, insurers would benefit from the sharing of risk management best practices, possibly leading to a lowering of exposure to high-risk assets and adoption of risk-based capital management", he said.