What Is The Significance Of The New Insurance Bill? How Will It Affect Us?

by Shatakshi Gupta

The Rajya Sabha on Thursday passed the Insurance (Amendment) Bill, 2021, providing for the Foreign Direct Investment (FDI) limit in the insurance sector to 74. At present, up to 49% of the FDI is allowed in the insurance sector.

The move will facilitate companies’ growth

 Discussing the bill in the Rajya Sabha, Finance Minister Nirmala Sitharaman said that increasing the FDI limit would help companies in the region to meet the growing capital requirements. She said that the purpose of this amendment is that companies can decide to what extent they want to allow FDI. The Finance Minister said that it is neither a matter of disinvestment nor privatization. The insurance sector regulator has decided to increase the limit of foreign investment after consideration with all parties.

26000 crores investment has come since 2015

 The Finance Minister said in the House that in 2015 the FDI limit in the insurance sector was raised to 49%. Since then FDI worth 26 thousand crores has come in this sector.  Replying to the discussion, Nirmala said that insurance companies are facing a liquidity crisis. Increasing investment limits will allow companies to fulfil their capital needs.

Boost to employment

The Finance Minister said that more and more investment in this sector will increase competition. With this, people will get a better package, better premium facility. Also, employment opportunities will be available for the people. The Finance Minister said that IRDAI has consulted more than 60 insurance companies, promoters, economic experts and other parties. The regulator supported raising the FDI limit in the insurance sector. After the Minister’s reply, the Bill was approved by voice vote.

Consumers will get better options

 The customer will get a lot of products. They will be able to choose from a basket of products. Whether it is life insurance or general insurance, they will get multiple options in both. In general, major changes will be seen in health insurance and vehicle insurance after this.  The customer can get more investment options in insurance. Right now most of the products in life insurance are about covering the risk only.

Also read: Why Government Is Focusing On Privatization? Know Its Significance

Insurance penetration will be increased

When the money is infusedinto the companies, they will increase their investment.  Will open more offices. By employing more people, they will be able to expand their business in the far-flung areas of the country. This will increase awareness among customers through the reach of many insurance companies to villages and small towns.So, in this way, India will compensate for its much lower insurance penetration.

Current insurance awareness in India

Insurance awareness in India is only 3.7%. In this 3.7% Life insurance penetration is 2.74%. Whereas, Non-life has an awareness of 0.97%.  Companies with insurance intermediaries such as brokers, consultants and third party administrations, surveyors, have 100% FDI approval.