MUMBAI (Reuters) - The reach of life insurance products in India is expected to match the level of more affluent Asian countries in the next 4-5 years, the chief of the country's insurance regulatory body said.

Only one out of 40 Indians is insured, but rising incomes and awareness would help double that spread, C.S. Rao, chairman of the Insurance Regulatory and Development Authority in India, said at an industry summit on Monday.

"The penetration level of advanced Asian countries like Malaysia and Singapore is around 5 percent. I think India will reach that level in 4-5 years' time," Rao said.

In a market controlled 70 percent by state-owned Life Insurance Corp of India, private and foreign players have moved in to capture rising demand.

However, a cap on foreign investment in the insurance sector at 26 percent was affecting capital inflow, foreign insurance companies operating in India said.

The limit affected the level support from the foreign parent to develop the business in India, said Bert Paterson, Managing Director of Aviva Life Insurance Co India Pvt Ltd., the local unit of UK's Aviva Plc.

"It clearly limits the amount of capital that Aviva is able to bring to India," he said.

New York Life of the United States would also be keen to invest in India, if the cap was raised, Gary R. Bennett, Managing Director and Chief Executive Officer of Max New York Life Insurance Co Ltd. said.

"More FDI (foreign direct investment) in this market place will mean more investment, more job creation," he said.

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