Draft Bill for Insurance Sector Reforms
The finance ministry is preparing to present a draft bill to the union cabinet, proposing significant changes in the insurance sector's foreign direct investment (FDI) policies and operational frameworks.
Key Proposals
- Increase in FDI Limit:
- Proposal to raise the FDI limit from 74% to 100%.
- This change targets companies investing the entire premium within India.
- The existing conditions and guardrails on foreign investment will be simplified.
- Unified Licence for Insurers:
- Introduction of a unified licence aimed at streamlining operations.
- Operational Autonomy for LIC:
- Increased autonomy in hiring and compensation for the Life Insurance Corporation.
- Amendments to the LIC Act to facilitate overseas office operations and staff management.
- Removal of Capital Requirement:
- Elimination of the ₹100 crore minimum paid-up equity capital requirement for life, general, and health insurance businesses.
Impact and Implementation
- Financial Impact:
- Potential flow of ₹40,000-45,000 crore in bank deposits due to income tax concessions.
- The insurance sector has already attracted ₹82,000 crore through FDI.
- Legislative Changes:
- Amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.
Next Steps
The finance minister has approved the draft bill, and it is set to be presented to the cabinet post-legal vetting. The aim is to introduce the bill in the current budget session as part of new-generation financial sector reforms.