Finmin plans to introduce Insurance Amendment Bill during monsoon session

The Insurance Amendment Bill, which proposes 100 per cent FDI in the insurance sector, may be introduced in Parliament in the upcoming monsoon session, sources said.

The draft bill is ready and will be placed before Cabinet for its approval soon, sources said, adding, after Cabinet nod the Department of Financial Services under the finance ministry would begin the process for introduction of the Bill in the Parliament.

The ministry hopes to table the Bill in Parliament during the upcoming monsoon session, sources said.

Monsoon session of Parliament usually commences in July.

Finance Minister Nirmala Sitharaman in this year's Budget speech proposed to raise the foreign investment limit to 100 per cent from existing 74 per cent in the insurance sector as part of new-generation financial sector reforms.

"This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," she had said.

The finance ministry has proposed to amend various provisions of the Insurance Act, 1938, including raising foreign direct investment (FDI) in the insurance sector to 100 per cent, reduction in paid-up capital, and provision for composite licence.

The bill also proposes agents to be allowed to sell products from multiple insurers breaking away from the existing exclusivity model.

As part of comprehensive legislative excercise, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act, 1999 will be amended alongside the Insurance Act, 1938.

The amendments to LIC Act proposes to empower its board to take operational decisions like branch expansion and recruitment.

The proposed amendment primarily focuses on promoting policyholders' interests, enhancing their financial security, and facilitating the entry of more players into the insurance market leading to economic growth and employment generation.

Such changes will help enhance efficiencies of the insurance industry, enabling ease of doing business and enhancing insurance penetration to achieve the goal of 'Insurance for All by 2047'.

The Insurance Act, of 1938, serves as the principal Act to provide the legislative framework for insurance in India. It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator IRDAI.

The entry of more players in the sector would not only push penetration but result in greater job creation across the country.

Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd.

The FDI limit in the insurance sector was last raised -- from 49 per cent to 74 per cent -- in 2021. In 2015, the government had hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent.