Lok Sabha passes insurance reform bill, raises FDI limit to 100% to boost competition, affordability

The Bill would lead to amendments in the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.The amendment seeks to raise the foreign direct investment (FDI) limit in the insurance sector from 74 per cent to 100 per cent.It also paves the way for the merger of a non-insurance company with an insurance firm.The finance minister said that the government led by Prime Minister Narendra Modi raised the FDI limit for insurance companies from 26 per cent to 49 per cent in 2015 and from 49 per cent to 74 per cent in 2021 to attract global capital and technical know-how.Similarly, the FDI limit for insurance intermediaries was raised to 100 per cent in 2019 to enable them to provide better advisory services to citizens.To make insurance more affordable, Sitharaman said the 56th GST Council Meeting held in September unanimously agreed to remove GST on individual life and health insurance premiums.There is now a nil GST rate, which was earlier 18 per cent on all individual life insurance policies and individual health insurance policies and this is a significant tax relief that directly reduces the cost of premiums for policyholders, encouraging more people to insure themselves and their families, she said.The GST Council secretariat is monitoring complaints regarding GST cut benefit not being passed on to policyholders, she added.Talking about the features of the bill, Sitharaman said, it provides for the establishment of the Policyholders’ Education and Protection Fund to protect policyholders’ interests from the fines collected by the regulator, Insurance Regulatory and Development Authority of India (IRDAI).It also proposes to empower the regulator to disgorge wrongful gains made by insurers and distribute them to affected insurance policyholders.The Bill also seeks to reduce the net own fund requirement for foreign reinsurance branches from Rs 5,000 crore to Rs 1,000 crore, which would invite more reinsurance into this country, create greater risk management and risk capacity, and create a level playing field.Besides, there is a provision for the merger of a non-insurance company with the insurance company with a view to promoting a simplified corporate structure.In addition, the bill seeks to provide greater autonomy to Life Insurance Corporation of India (LIC).”We are providing autonomy to LIC to open zonal offices and aligning compliance for its foreign offices with the laws and regulations which prevail in the respective jurisdictions,” she said.



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