The Insurance Laws bill has cleared by the cabinet and it aims to increase the foreign direct investment in the field of insurance to around 49 percent. Currently, the investment level is about 26 percent. Below PolicyBoss explains how higher insurance FDI limit could boost this sector effectively:
• The insurance sector is vast and needs huge amount of capital. Only higher FDI cap will help this industry to grow. As we all know, this sector is hungry for investment. Finance Minister, Arun Jaitely explained that different segments of this industry require an expansion and hence, propose extension of FDI limit in the budget.
• In case the higher FDI limit is increased with good percent in insurance industry, then it could outcome expensive inflows over time.
• The Insurance Laws (Amendment) bill includes that management control of all insurance companies in India will only be with the Indian companies. The Foreign Investment Promotion Board i.e. FIPB would not be required for up to 26% FDI in insurance. But, approval of the board would be necessary for the 49% limit.
It could help in deepening the insurance penetration in India. Term insurance
penetration is nearly 3.2% of gross domestic plan in terms of total premiums underwritten in a year.
• Out of 24 2013. LIC holds around 70% of the life insurance business.
• It could boost employment creation in this field and higher cap will support insurers to knock under-covered markets through more manpower and better infrastructure facilities.
• The higher insurance FDI limit would be good for the pension sector. The Pension Fund Regulatory Development Authority bill binds the FDI limit in pension sector. It clearly means 49% ownership by foreign companies in non-global businesses selling pension policies.
• Usually, investors have a tendency to invest money in pension and insurance products on a long term basis and this amount could fund infrastructure projects.