The Insurance Amendment Bill 2021 was passed by the Rajya Sabha, which enormously increased the maximum foreign investment from 49% to 74% in an insurance company. This bill was passed by Ms. Nirmala Sitharaman, the Minister of Corporate Affairs, on March 15, 2021. This bill was a sheer difference from the earlier FDI trudge, which almost took a long seven years to reach its goal from 26% to 49% in 2015.
After the Insurance Amendment Bill was passed, a discussion was held related to this bill on March 22 in Lok Sabha. In this discussion, opposition leaders, including Manish Tiwari, put up the matter of inquiry as to why the government so desperately wanted to pass the Insurance Amendment Bill 2021 when it was against the passing of this bill previously.
In order to clear the air of doubts, Nirmala Sitharaman stated the facts that there was a vital urgency to pass the Insurance Amendment Bill 2021 to uplift the FDI rate to 74% in the insurance industry. So maximum capital and inputs should be made available for the benefit of insurers.
About Insurance Bill
The Finance Minister had declared the Insurance Amendment Bill 2021 on February 1 in the Union Budget. The FDI rate shall rise from 49% to 74%. Under the Insurance Amendment Bill 2021, it was estimated that the primary management posts would be mostly the resident Indians, and at least 50% will be independent directors. Furthermore, a neutral percentage of profit shall be reserved for them.
Indian directors shall be at avail to either accept or reject any decision of any board member related to the company issues. This concept is known as Indian management control.
- The Insurance Amendment Bill 2021 attempts to pass the Insurance Act, 1938.
- The primary function of the Act was mainly for the proper and regulatory functioning of insurance businesses as well as modulating the association among insurers, and it is the holder, client, customer, and creditor.
- It also contains rules and regulations concerning the regulator, i.e., The Insurance Regulatory and Development Authority of India. These activities were furnished by the Insurance Amendment Bill 2021.
After the passing of the Insurance Amendment Bill 2021, it was evaluated that the small Indian insurance companies will give way to more prominent foreign investors or companies.
When the FDI limit rose to 49%, numerous foreign investors had hiked their fate in the Indian insurance companies. This included Nippon Life, Tokio Marine, and Japan’s Daiichi.
Insurance Sector in India
The insurance industry in India has a total of 57 insurance companies, 24 in the life insurance business, and 33 are non-life insurance. Among all of these, LIC (Life Insurance Corporation) is the primary public sector company.
SBI General Insurance got paired with IntrCity Railyatri in December 2020 to provide bus services with domestic travel insurance. It takes into account diverse areas of concern like accidental death, permanent disability, and emergency evacuation.
ICICI, Lombard got paired with Plum in December 2020 to establish a technologically based health insurance product. They aim to fix four issues such as real-time pricing, program administration, and onboarding. The IFSCA also partnered with the International Association of Insurance Supervisors ( IAIS) on December 02, 2020.
After the FDI hike of 2015, it was expected that the insurance sector would hold fresh capital of Rs. 25000 crore, but the ground reality was just merely Rs. 5400 crore. The local company sold its stakes to the foreign joint venture company. However, such stakes did not increase any position of the insurance companies.
READ ALSO: IS ELECTION PROCESS IN INDIA FAIR?
Major Highlights of Insurance Amendment Bill, 2021
The Insurance Amendment Bill 2021 mainly tries to uplift the maximum foreign investment which is allowed to be flown into an Indian Insurance company.
- The Act provides the foreign investors to hold 49% of capital in Indian insurance companies, which are to be under the surveillance and supervision of an Indian organization.
- Such foreign investment must be pertaining to the additional rules as suggested by the Central government.
Investment of Assets
- The Act provides insurers to hold a minimal investment of assets to clear their insurance debts and claims.
- The Act also stipulates that this will only apply to an insurer resident in India in which at least 33% capital is to be with the investor who is residing outside India and the rest 33% with the members of the governing body residing outside India.
- More distribution of capital: The FDI distributes fresh capital to insurance companies.
- Better Solvency: It not only provides better Solvency positions but also provides better and higher long-term growth capital for other companies to invest in newer technologies.
- Insurance Penetration: It helps in tackling the losses as well as gains through insurance penetration.
- Technological impetus: The additional funds can be used to invest in technological impetus through online platforms as well.
So it can be concluded that Insurance Amendment Bill 2021 has been a significant step taken to be the Government of India. Let us hope that this will be a great change towards the development of India.