The Insurance Amendment Bill, proposing a 100% FDI cap in the insurance sector, is expected to be introduced in the upcoming monsoon session of Parliament. Key features of the bill include allowing agents to sell products from multiple insurers and simplifying foreign investment rules.
New Delhi: The Insurance Amendment Bill, which proposes increasing foreign direct investment (FDI) in the insurance sector to 100 per cent, is expected to be introduced in the upcoming monsoon session of Parliament, according to sources. The draft bill is ready and will soon be presented for Cabinet approval. Following this, the Department of Financial Services under the Ministry of Finance will initiate the process to introduce the Bill in Parliament. The monsoon session of Parliament typically begins in July.
Finance Minister Nirmala Sitharaman had proposed raising the foreign investment cap in the insurance sector from 74 per cent to 100 per cent during this year’s Budget speech. This move is part of broader financial sector reforms aimed at attracting more foreign investment and enhancing the sector’s growth. The increase in FDI would be applicable to companies that invest the entire premium in India. Additionally, the finance ministry plans to review and simplify the existing guardrails and conditionalities associated with foreign investment.
Proposed changes in the insurance sector
The Insurance Amendment Bill seeks to amend several provisions of the Insurance Act, 1938. Key changes include increasing FDI in the insurance sector to 100 per cent, reducing paid-up capital requirements, and allowing composite licences. The bill also proposes a shift away from the current exclusivity model by allowing agents to sell products from multiple insurers.
Comprehensive legislative changesIn addition to amending the Insurance Act, 1938, the Life Insurance Corporation Act 1956 and the Insurance Regulatory and Development Authority Act, 1999 will also be amended as part of this comprehensive legislative exercise. The amendments to the LIC Act will grant the LIC board greater autonomy in operational decisions, such as branch expansion and recruitment.
Focus on policyholders and market growthThe proposed amendments are designed to promote the interests of policyholders, enhance financial security, and facilitate greater competition in the insurance market. The bill aims to improve the efficiency of the insurance industry, simplify business operations, and increase insurance penetration. This is aligned to achieve “Insurance for All by 2047,” boosting economic growth and job creation.
Impact on the insurance industryThe changes in the Insurance Act, 1938, will reshape the regulatory framework of the sector and encourage the entry of new players, which is expected to drive growth and enhance penetration. Currently, India has 25 life insurance companies and 34 non-life or general insurance firms. These changes are anticipated to create more job opportunities across the country and contribute to the overall development of the sector.
FDI limit historyThe FDI limit in the insurance sector was last raised in 2021 from 49 per cent to 74 per cent. In 2015, the government had increased the cap from 26 per cent to 49 per cent. The proposed 100 per cent FDI limit is expected to further boost foreign investment and bring in more global players to the Indian market.
(With PTI inputs)
