Insurance Amendment Bill likely in Winter session: Nirmala Sitharaman
What's the story
Finance Minister Nirmala Sitharaman has hinted that the Insurance Amendment Bill, which proposes 100% Foreign Direct Investment (FDI) in the insurance sector, could be introduced in Parliament during the upcoming Winter session. The session usually starts in the second half of November and ends before Christmas. Sitharaman had proposed raising the foreign investment limit to 100% from the current 74% as part of new-age financial sector reforms.
Bill details
Proposed bill seeks to simplify existing guardrails
The proposed bill, which Sitharaman said she hopes to introduce soon, seeks to simplify the existing guardrails and conditionalities associated with foreign investment. "The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," she said. The enhanced limit would be applicable for companies investing the entire premium in India. So far, the insurance sector has attracted ₹82,000 crore through FDI.
Legislative changes
Key amendments to the Insurance Act
The Finance Ministry has proposed amending several provisions of the Insurance Act, 1938. This includes raising FDI in the insurance sector to 100%, lowering paid-up capital requirements, and introducing a composite license provision. The amendments will also involve changes to the Life Insurance Corporation Act of 1956 and the Insurance Regulatory and Development Authority Act of 1999 as part of a comprehensive legislative exercise.
Amendment goals
Proposed amendments expected to enhance financial security of policyholders
The proposed amendments mainly focus on promoting policyholders' interests, enhancing their financial security, and facilitating the entry of more players into the insurance market. This is expected to lead to economic growth and job creation. The Insurance Act of 1938 serves as the principal legislation for insurance in India, providing a framework for the functioning of insurance businesses, while regulating relationships between insurers, policyholders, shareholders, and regulators like IRDAI.
Previous increases
FDI limit raised from 49% to 74% in 2021
The FDI limit in the insurance sector was last increased from 49% to 74% in 2021. Before that, it was raised from 26% to 49% in 2015. Currently, there are 25 life insurers and 34 non-life or general insurers operating in India, including specialized general insurers such as Agriculture Insurance Company of India Ltd and ECGC Ltd.