The Upper house of the Indian Parliament (Rajya Sabha) has passed the “Insurance Amendment Bill 2021”. The new Bill will amend the Insurance Act of 1938. IT was passed even after the Opposition parties was criticising the bill for its clause that enable “control and ownership” by the foreign investors.

Provisions of the bill

The Insurance Amendment Bill 2021 will increase the limit of foreign direct investment from 49% to 74% in Indian insurance companies. The Insurance Amendment Bill 2021 also comprises of the provision for removal of restrictions on ownership & control on the insurance companies. As per the new bill, majority of directors on the board and key management persons will have to be resident Indians. Thus, this provision will make them accountable to the Indian law. Further, the Insurance Amendment Bill specifies that at least half of directors have to be the independent directors which also ensures the accountability.

Backdrop

Union Minister Nirmala Sitharaman has proposed during her presentation of the Union Budget 2020-21 to liberalize the FDI in Indian insurance companies to 74 per cent.

Benefits

This move will provide access to fresh capital to some of the insurers. The experts also believe that the decision will also benefit the individual policyholders. Increase in the Foreign Direct Investment limit will also attract the foreign capital where it is required. It will ensure higher penetration and will bring a new wave of transformative change in order to create more of value-based affordable healthcare for Indians.

India’s Life Insurance Sector

The market for insurance which covers both public and private sector organisations. As an “Union List Subject, Insurance is listed in the 7th Schedule of the Indian constitution. Thus, this sector can only be legislated by Government. In India, the insurance sector has gone through several phases since government allowed the private companies to solicit the insurance in 2000. The government of India also allowed Foreign Direct Investment in Insurance by setting the limit on FDI to 26 per cent. In 2014, this limit was increased to 49 per cent.

Rajya Sabha passes 2021 Insurance Amendment Bill Rajya Sabha passes 2021 Insurance Amendment Bill