The Ministry of Finance has proposed amendments to the Insurance Act, 1938, aimed at boosting the insurance sector, including raising the foreign direct investment (FDI) limit in Indian insurance companies to 100% from the existing 74%. The amendments also suggest introducing a composite licence system and reducing paid-up capital requirements.
The Department of Financial Services (DFS) has invited public feedback on these proposals, with the consultation period open until December 10, 2024. This marks the second round of public consultation on the matter, following a similar exercise in December 2022.
Key Highlights of the Proposed Amendments:
- Increase in FDI Limit:
- The FDI cap in Indian insurance companies will rise from 74% to 100%, enabling full foreign ownership in the sector.
- Composite Licence Provision:
- The proposed amendments include the introduction of composite licences, allowing insurers to operate across multiple segments, such as life, general, and health insurance, under a single licence.
- Reduced Paid-up Capital:
- The government plans to lower the minimum paid-up capital requirements, potentially easing the entry for new players into the market.
- Policyholder-Centric Approach:
- The changes aim to improve financial security for policyholders, increase accessibility and affordability, and enhance industry practices.
- Economic and Industry Growth:
- The reforms are intended to attract more players to the insurance market, fostering economic growth, employment generation, and industry development.
Objectives:
According to the Finance Ministry, these changes are part of a comprehensive review of insurance laws conducted in collaboration with the Insurance Regulatory and Development Authority of India (IRDAI) and industry stakeholders. The proposed amendments are expected to streamline business processes, promote policyholder interests, and drive the expansion of insurance coverage across the country.
The Ministry’s move reflects its ongoing efforts to modernize the insurance sector, making it more competitive and inclusive while aligning it with global standards.
