New Delhi [India]: The central government has unveiled significant proposals to reform the insurance sector, including raising the FDI limit in Indian insurance companies from 74% to 100%, reducing the net owned funds requirement for foreign re-insurers, and enabling insurers to operate multiple classes of insurance businesses.
Key Proposals
- FDI Limit Increase:
- The government plans to raise the foreign direct investment (FDI) limit in Indian insurance companies to 100%, aiming to attract more global capital and boost the sector’s growth.
- Net Owned Funds Requirement:
- The proposal includes reducing the net owned funds requirement for foreign re-insurers operating in India from ₹5,000 crore to ₹1,000 crore, making it easier for international players to enter the market.
- Business Flexibility for Insurers:
- Insurers may be allowed to undertake one or more classes of insurance business and activities, promoting operational flexibility.
- Accessibility and Affordability:
- Amendments to existing laws aim to enhance insurance accessibility and affordability for citizens, foster industry growth, and streamline processes.
- Lower Entry Capital for Niche Segments:
- IRDAI will be empowered to set lower entry capital requirements (not below ₹50 crore) for insurers focusing on underserved or unserved segments.
Legislative Framework Under Review
The proposed changes involve amendments to the Insurance Act, 1938, Life Insurance Corporation Act, 1956, and Insurance Regulatory and Development Authority Act, 1999. The government has invited public comments on these proposals until December 10, 2023, via email at consultation-dfs@gov.in.
Industry Impact
The reforms align with the Insurance Regulatory and Development Authority of India (IRDAI)‘s goal of achieving “Insurance for All” by 2047. A report by global consultancy firm McKinsey highlights that expanding insurance penetration could save India $10 billion annually by reducing uninsured risks and out-of-pocket expenses, alleviating the burden on public finances.
Conclusion
These reforms signal the government’s commitment to enhancing the insurance sector, increasing coverage for citizens and assets, and fostering economic resilience. Public participation is encouraged to refine and shape these transformative changes.