The Insurance Amendment Bill, which proposes 100 percent FDI in the insurance sector, may not be introduced in Parliament in the ongoing session, sources said. Some amendments may be required in the draft Bill after receiving comments from stakeholders, sources said.
Given the limited time, it is difficult to introduce the Bill in the ongoing session, sources said, adding however that it may come during the Budget.
The finance ministry has proposed to amend various provisions of the Insurance Act, 1938, including increasing foreign direct investment (FDI) in the insurance sector to 100 percent, reducing premiums, and providing for a composite license.
The Department of Financial Services (DFS) has sought public comments on the proposed amendments on December 10. As per the proposal, the FDI limit in Indian insurance companies will be increased from 74 percent to 100 percent.
This is the second public consultation that DFS is seeking regarding proposed amendments to the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the Insurance Regulatory Authority and Development Act, 1999.
The finance ministry in December 2022 invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Development Act, 1999.
According to a recent office memorandum, it is proposed to amend certain provisions of the insurance law to ensure affordability and affordability of insurance to citizens, promote the expansion and development of the insurance industry, and simplify business processes.
In this regard, a comprehensive review of the regulatory framework governing the sector has been undertaken in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and the industry, it said.
The proposed amendments are mainly focused on improving the interests of policyholders, improving their financial security, and facilitating the entry of many players into the insurance market leading to economic growth and job creation, the memorandum said.
Such reforms will help improve the efficiency of the insurance industry, ease of doing business and improve insurance penetration to achieve the goal of ‘Insurance for All by 2047’, it said.
“The proposal includes raising the FDI limit in Indian Insurance Companies from 74 percent to 100 percent and enabling an insurance company to carry on one or more classes of insurance business and related/insurance activities,” he said.
In addition, it said, the requirement for funds held by foreign insurers is also proposed to be reduced from Rs 5,000 crore to Rs 1,000 crore. “Also, IRDAI has been empowered to specify minimum entry fee (not less than Rs 50 crore), for underserved or underserved categories under special circumstances,” he said.
The Insurance Act, 1938, serves as the main Act to provide the legal framework for insurance in India. It provides a framework for the operation of insurance businesses and regulates the relationship between the insurer, policyholders, shareholders and the regulator IRDAI.
The entry of more players in this sector will not only boost the entry but will also create job opportunities across the country.
Currently, there are 25 life insurance companies and 34 non-life or general insurance companies in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd.
