Concerns with the Insurance (Amendment) Bill, 2021
The Parliament has passed the Insurance (Amendment) Bill, 2021 with the Lok Sabha approving it. The Rajya Sabha has already passed the legislation. The Insurance (Amendment) Bill, 2021 has few important concerns. But the move is a welcome step to the Insurance sector.
Objective of the Insurance (Amendment) Bill 2021
- The Bill seeks to amend the Insurance Act, 1938 which will increase the ceiling limit of foreign investment allowed in Indian insurance companies.
- The Bill provides to increase the foreign direct investment limit from existing 49 percent to 74 percent. It also has a provision for removal of restrictions on ownership and control of insurance companies.
- The Bill seeks to increase the maximum foreign investment allowed in an Indian insurance company from 49% to 74%.
- The bill also removes restrictions on ownership and control.
Concerns with the Insurance (Amendment) Bill 2021
- The present actual share of FDI in the insurance sector is less than the current limit of 49%. Further, the present target was aimed to achieve within 5 years. But that is not achieved so far. Hence, there is no justification for increasing the limit to 74%.
- Infusion of market funds in the insurance sector is not viable. The critics mention the time when financial institutions like DHFL, Yes Bank have collapsed, infusing market funds might lead to the collapse of insurance institutions also.
- The Bill does not have a provision to prevent financially weak foreign companies from entering into the Indian insurance sector.
- Many Indian insurance companies are already in Joint Venture with foreign companies. Hence, the Government’s claim that foreign investment is needed for bringing newer technology to the country is not substantiated.
