The government is planning to amend the insurance laws in the current session of Parliament. According to officials, mainly two changes are proposed. Unified license for insurance companies and increasing the foreign direct investment (FDI) limit in this sector from the current 74% to 100%.
If these changes happen then the reach of insurance in the country will increase. According to research firm Swiss Re Institute, currently insurance penetration in India is only 3.8%. Unified license is a composite license. This will allow a single company to offer life, general and health insurance products.
Currently, life insurance companies cannot sell products like health cover. However, general insurance companies are allowed to sell health to marine insurance policies. The government wants to remove this complication.
What will be the benefit of allowing 100% FDI?
- Insurance industry requires huge capital. The government wants to attract foreign companies with huge capital by allowing 100% foreign investment.
- This strategy will increase competition for domestic giants like SBI, HDFC, ICICI, Tata and Birla, who currently dominate the sector.
- Some foreign companies like Allianz, which is reportedly going to be spun off from Indian partner Bajaj, may enter the Indian market independently.
What changes will be brought about by the system of unified license?
- Domestic and foreign insurance companies will be excited to increase investment as they will get an opportunity to enter new segments as well.
- Only one company will be able to provide all types of insurance covers. Customers will no longer need to go to different companies for different insurance.
- Life insurance companies will also be able to sell other products like health cover. On the contrary, general insurance companies will also be allowed to sell life insurance policies.
Big stake: That's why India is an attractive market for foreign companies According to a report by American management consulting firm McKenzie, the gross written premium of the Indian insurance industry in 2023 will be around Rs 11 lakh crore. The industry is seeing 11% compounded growth (CAGR) since 2020. In terms of premium growth, India has left some Asian countries behind in recent years.
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