Boost for Modi reforms agenda: Parliament clears Insurance bill

In a triumph for the Modi government’s reforms agenda, the Indian parliament passed a long-pending bill to increase the foreign investment cap from 26 per cent to 49 per cent in the insurance sector.

While introducing the bill in Rajya Sabha (upper House), Minister of State for Finance Jayant Sinha said, “Increase in the FDI cap would ensure better insurance penetration and expansion of the sector into areas such as crop and health insurance.”

FICCI Director General Arbind Prasad promptly welcomed the bill, saying “the passage of Insurance Amendment Bill in Rajya Sabha marks a new beginning for the Indian insurance sector.”

The billwill replace the ordinance promulgated in December 2014. It was approved by Lok Sabha on March 4, and Rajya Sabha passed it on March 12 by a voice vote. Opposition parties such as Congress, NCP, BJD and AIADMK supported the billin Rajya Sabha, where the BJP-led NDA ruling coalition is in a minority.

Indian entrepreneur Sunil Mittal, the CEO of Bharati Airtel, announced that joint venture partner Axa is expected to raise its investment to the new limit. “This is a highly positive development which will bring the much-needed investments for the growth of the insurance industry,” Mr Mittal said.

The facility to increase the overseas investment in insurance is seen as significant progress towards economic reforms in India.

The new insurance bill allows foreign companies to invest up to 49 per cent in domestic insurance firms. According to estimates, Rs. 20,000 crore to Rs. 25,000 crore in foreign funds are likely to flow into the insurance sector. The money will help insurance companies to expand aggressively and will be beneficial for the people. It will be a big positive for private insurers who have limited presence beyond metros and tier 1 cities.

Experts believe that more companies are likely to enter in to the insurance sector as well, spurring higher competition. Insurance premiums may get cheaper for customers, analysts say.

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