Cabinet nods for amendments in Insurance Act, FDI to increase to 74%: Report
In the Insurance Act, the Union Cabinet has given the green signal for 74% foreign direct investment in the sector. At present, the permissible FDI limit is 49% in life and general insurance with ownership and management control with Indian.
As per sources, the Cabinet has given a nod for amendments in the Insurance Act, 1938. Finance Minister Nirmala Sitharaman in Budget 2021-22 said, “I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% in insurance companies and allow foreign ownership and control with safeguards.”
As per the new structure, the majority of directors on the board and key management persons would be resident Indians, with at least 50% of directors being independent directors, and specified percentage of profits being retained as a general reserve.
She had also said that for investor protection, an investor charter would be introduced as a right of all financial investors across all financial products. It was in 2015 when the government hiked the FDI cap in the insurance sector from 26% to 49%.
With the increase in FDI the life insurance penetration in the country will improve. Life insurance premium as a percentage of GDP is 3.6% in the country, way below the global average of 7.13%, and in case of general insurance, it is even worse at 0.94% of GDP, as against the world average of 2.88%. The government has earlier allowed 100% foreign direct investment in insurance intermediaries.
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