Insurance sees FDI Flow of Rs. 13,000 Crore After Amended Law

Amid a lot of political drama, the Modi government had cleared the Insurance Law Amendment Bill, lifting foreign direct investment ceiling in insurance to 49% in March 2015, kick-starting economic reforms. With this, foreign direct investment of up to Rs 13,000 crore has come in to the insurance sector. Around a dozen foreign promoters have increased their stake in the Indian insurance joint venture after the amendment to the Insurance Laws. This was seen as a major reform for the government and a key one to stimulate insurance growth. 

The only dampener was the caveat on ownership and control that had to be with Indian residents. Earlier, the Insurance Act did not provide for control and ownership of an Indian insurance company to be with resident individuals. So, it was possible for offshore strategic partners in the insurance sector to have substantial control rights, including reserved matters or veto rights on operational and financial policy decisions of the joint venture. Apart from the hike in FDI, the amendment to the Bill gave more power to the Insurance Regulatory and Development Authority to take decisions on issues like expenses or listing which were hard coded in the Insurance Act 1938. 

Higher FDI has enabled companies to look at initial public offering of shares and two large companies like ICICI Prudential and HDFC Life have started working towards it. 

In the last two years, the Modi government have launched a number of insurance schemes for, which are of enormous help and a nominal premium. India has the second highest population and the highest number of insurance policies of 360 million in the world, still penetration level is low at 4% of the GDP.