On 12th March 2015, Parliament of India facilitated the passage of the Insurance Bill (Insurance Laws Amendment Bill), adopting the measure hiking the foreign equity cap on domestic companies from 26 percent to 49 percent. According to the Bill, up to 26 percent foreign capital will be under the automatic route, the balance 23 percent of the foreign capital needs to secure approval from the Foreign Investment Promotion Board (FIPB).
The most important things you must know about the Insurance bill are listed below-
* Public sector general insurance companies would be allowed to raise funds from the capital market.
* Start up capital for health insurers would be Rs.100 crore.
* Life Insurance Council and the General Insurance Council will be empowered to act as self-regulating bodies
* Legal recourse to individual customers against insurers
* Flexibility in paying premium through instalments, faster claim settlement, simpler policies, capping on agents’ commissions and consumer redressal.
* For insurance companies, the bill provides for more distribution points for insurance policies, less dependence on insurance agents, ability to raise capital from the market, adoption of international best practices by joint ventures (JVs) and greater role of technology to increase electronic issuance of policies.
* Foreign reinsurers will be allowed to open branch offices in India.
“The bill should have been passed in 2008. But due to various factors it got postponed. We are glad it has been finally passed today (Thursday),” V.Manickam, secretary general, Life Insurance Council told IANS.
“The increase in FDI limit will help attract the much needed long term capital for the sector and would have multiplier effect on the state of economy especially in meeting the huge infrastructure financing requirements,” Chandrajit Banerjee, director general, CII said in a statement here.
“The passage of the insurance bill gives a bigger signal for investors. For the insurance industry, the new law would help to expand the market and increase the penetration which is abysmally low at around three percent,” Vibha Padalkar, executive director and chief financial officer at HDFC Standard Life Insurance Company told IANS.
Shashwat Sharma, partner, international accounting firm KPMG in India, said: “With the Insurance Laws (Amendment) Bill, 2015 being cleared by Parliament investment of around Rs.200 billion is likely to come into the Indian insurance sector over next few years. There is a lot of interest among foreign insurance companies to enter the market here as it has a lot of potential of growth.”
“If the economy grows at 6-7 per cent per annum, the insurance industry is likely to see foreign inflow of around $8 bn -$10 bn in next five years. This will provide huge employment opportunities in the Indian market. The direct employment in health insurance, micro insurance and pension and retirement segments are expected to see a sharp growth in the coming years. Overall, we can expect a 25 per cent increase in both direct and indirect employment as insurance firms expands their business operations,” said P. Nandagopal, promoter OpenWorld Money Financial Services Marketplace and former managing director and CEO of IndiaFirst Life Insurance.