Prelims: Current events of national and international importance | Economy
Why in news?
Lok Sabha has passed the insurance bill seeking to remove the Foreign Direct Investment (FDI) cap, along with over a dozen key sectoral reforms.
- Aim – To liberalise, modernise & democratize India’s insurance sector.
- It ensures wider coverage, stronger regulation, and better consumer protection while opening the doors to global investment and expertise.
- Amended laws – Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.
Key Provisions of the Bill
- FDI Increase – It raises the foreign investment cap in insurance from 74% to 100%, to attract investment, facilitate technology transfer, increase insurance penetration and social protection.
FDI limit for insurance companies was raised from 26% to 49% in 2015 and from 49% to 74% in 2021 and now it is 100%.
- Regulated by– It grants IRDAI authority to expel wrongful gains from insurers and intermediaries, strengthening consumer protection.
- Autonomy to LIC – It gives LIC greater operational freedom, empowering it to set up new zonal offices without requiring prior government approvals, enabling faster expansion, improved administrative efficiency, and better regional oversight.
- Penalty Rationalisation – The maximum penalty on insurance intermediaries increased from Rs 1 crore to Rs 10 crore, aimed at serving as a strong deterrent and promoting adherence to legal and regulatory norms.
- Reinsurance Reform – It reduces the net owned fund requirement for foreign reinsurance branches from Rs 5,000 crore to Rs 1,000 crore, encouraging more reinsurers to operate in India.
- Public Sector Support – The government’s priority is to reinforce public sector insurance firms, noting that Rs 17,450 crore has been injected into three state‑owned general insurers to bolster their capital base.
- Sectoral Growth Data –
- Number of insurers - Increased from 53 (2014–15) to 74 (2024–25).
- Total insurance premium mobilised - During the same period went up from Rs 4.15 lakh crore to Rs 11.93 lakh crore.
- Assets under management (AUM) - Increased from Rs 24.20 lakh crore to Rs 74.43 lakh crore.
References
- The Hindu | LS passes bill on insurance sector
- Indian Express | LS passes Bill to raise FDI limit in insurance sector
