With the passage of the Insurance Laws (Amendment) Bill by the Rajya Sabha,
the investment-starved Indian insurance sector is hopeful of getting a big boost, the sector had got an initial boost in the year 2000 when it was opened for private players. Since then the sector has been growing gradually as several national and international players compete and increase operations in the country. But the sector still needs huge investments. The earlier foreign direct investment ceiling was at 26% stopping foreign investors from raising their stake in the domestic insurance companies.
Now, as the FDI Limit Raised by 74%. the insurance companies especially the private players are hopeful of getting a fresh breath.
The Bill not only paves way for foreign investors to raise their stake in domestic insurers.
but it has brought several changes that would impact your insurance policy.
The five important changes that you need to know as a policyholder
- According to the new law, an insurance policy cannot be challenged on any ground after three years of policy issuance. this law is in favor of the policyholder.
- This law says that if fraud or misrepresentation of fact (either deliberately or unintentionally) is detected after three years of the policy. subject to the policy is in force. the insurers will have to pay the policyholder
- But a new provision in the Bill is against policyholders. it is considered to be “retrograde” for policyholders. According to this new provision, the onus to prove that the policyholder had not made any statement wrong at the time of buying the policy would lie with the policyholder and not with the insurer. By this provision, insurance companies especially those with a bad track record will take advantage, and policyholders would be adversely affected.
- The new limit of 49% for foreign investors in the domestic insurance players, is estimated to receive Rs. 20,000 crores to Rs. 25,000 crores immediately. This would help insurers to expand their operations aggressively and will definitely be fruitful for the investment-starved sector and customers as well. The move will be more beneficial for the domestic players having a rare presence beyond metros and tier 1 cities.
- Another benefit for policyholders the new Bill has brought is that it gives more teeth to the insurance regulator, the Insurance Regulatory Development Authority of India (IRDAI). This would empower the regulator to penalize insurers who indulged in wrongful activities.
- With the raising of the FDI ceiling, domestic insurance firms can expand aggressively. Also, more companies are likely to enter the sector as well to tap the huge market. This would create healthy competition among the insurers, and finally, customers will be benefitted from lower premiums and high benefits.
One More Amendment, FDI Limit Raised by 74%
In the year 2015. the Indian government had changed the rules of foreign direct investment, which was the biggest demand at that time and because the government at the center was also new, people expected that the rules of foreign direct investment to some extent discount will be given. And because the central government always gave more importance to business, then with coming to power, they made way to promote business in India. In the year 2015, the Indian government increased the limit of foreign direct investment from 26% to 49%, due to this there were a lot of possibilities to increase business in the country, and now because any foreign company also needed so much exemption.
In the year 2021, once again the rules of foreign direct investment were changed, the Indian government revised the rules of foreign direct investment, and this time the limit of foreign direct investment was increased from 49% to 74%. We all know that the economy of the country is swinging, and Covid-19 has also contributed significantly to this condition of the country. The first challenge before the Indian government after coming out of the impact of Covid-19 was to accelerate the economy of the country and once again government increased the limit of foreign direct investment. However, this growth is limited to the insurance market only.
In front of the government, the question was to fix the economy and the government increased the limit of foreign direct investment, the reason is clear that the government is giving more and more foreign companies an opportunity to make their market in India and probably according to the government This is an important step to get the economy back to its place.
This step of the government is better to woo the foreign company, and somewhere we all know that foreign insurance companies in India are also engaged in spreading their market.
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