 "The insurance sector is at a critical juncture. Despite impressive growth in premium income – from Rs 1 trillion in FY05 to more than Rs 6.7 trillion in FY24 – the sector has yet to fully realise its potential in terms of broader penetration and impr")
The finance ministry has proposed to amend various provisions of the Insurance Act, 1938, including raising foreign direct investment (FDI) in insurance sector to 100 per cent, reduction in paid-up capital, and provision for composite licence.
The Department of Financial Services (DFS) has sought public comments on the proposed amendments by December 10.
As per the proposal, the FDI limit in Indian insurance companies will be raised from 74 per cent to 100 per cent.
This is the second public consultation that the DFS has sought on the proposed amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and Insurance Regulatory and Development Authority Act, 1999.
The finance ministry in December 2022 invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory Development Act, 1999.
According to an office memorandum dated November 26, 2024, it is proposed to amend certain provisions of insurance laws to ensure accessibility and affordability of insurance to citizens, foster expansion and development of the insurance industry, and streamline business processes.
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In this regard, a comprehensive review of the legislative framework governing the sector has been done in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and the industry, it said.
The proposed amendments primarily focus on promoting policyholders' interests, enhancing their financial security, facilitating entry of more players into the insurance market leading to economic growth and employment generation, the memorandum stated.
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', it said.
"The proposal includes raising the FDI limit in Indian Insurance Companies from 74 per cent to 100 per cent and enabling an insurer to carry on one or more classes of insurance business and activities related/incidental to insurance," it said.
Further, it said, the requirement of net-owned funds for foreign re-insurers is also proposed to be reduced from Rs 5,000 crore to Rs 1,000 crore.
"Also, IRDAI is being empowered to specify lower entry capital (not be less than Rs 50 crore), for under served or un-served segments on special case basis," it said.
The Insurance Act, 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.
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