The Union Finance Minister, Nirmala Sitharaman, has said the Insurance Amendment Bill will most likely come up for discussion in the Parliament’s upcoming winter session.
The discussion of the Bill is in line with the Finance Minister’s Budget speech this year, in which she proposed to raise the foreign investment limit in the insurance sector from 74 per cent to 100 per cent as part of “new-generation” financial sector reforms.
Saying she “hopes” that the bill will further liberalise Foreign Direct Investment (FDI) in the insurance sector, the finance minister also pointed out that the current conditions associated with foreign investment will be “reviewed and simplified”.
"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 stated.
The winter session of the Parliament usually commences in the second half of November and concludes before Christmas.
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The finance ministry has proposed to amend various provisions of the Insurance Act, 1938, including raising the FDI in the insurance sector to 100 per cent, a reduction in paid-up capital, and a provision for a composite licence.
As part of a comprehensive legislative exercise, the Life Insurance Corporation (LIC) Act 1956 and the Insurance Regulatory and Development Authority Act 1999 will also be amended alongside the Insurance Act, 1938, which serves as the principal Act to provide the legislative framework for insurance in India.
The amendments to the LIC Act propose to empower its board to take operational decisions like branch expansion and recruitment. The changes will focus 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.
The changes are aimed at improving the ease of doing business and enhancing insurance penetration to achieve the goal of 'Insurance for All by 2047'.
Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India, including specialised general insurance companies like Agriculture Insurance Company of India Ltd and ECGC Ltd.
So far, the insurance sector has attracted ₹82,000 crore through foreign direct investment (FDI).
The FDI limit in the insurance sector was last raised from 49 per cent to 74 per cent in 2021. Before that, in 2015, the government hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent.
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