The Rajya Sabha on Wednesday passed a bill to raise foreign direct investment in the insurance sector to 100% from 74%.
The 2025 Sabka Bima Sabki Raksha Amendment of Insurance Laws Bill was passed in the Lok Sabha on Tuesday. The bill seeks to amend the 1938 Insurance Act, the 1956 Life Insurance Corporation Act and the 1999 Insurance Regulatory and Development Authority Act.
It allows the merger of non-insurance companies with insurance firms, and provides for the establishment of a Policyholders’ Education and Protection Fund to protect the interests of policyholders.
Union Finance Minister Nirmala Sitharaman, during a debate on the bill, said that the amendments would allow foreign companies to bring in more capital in the insurance sector, PTI reported.
The opening of the sector has helped in increasing penetration of insurance in the country, Sitharaman said, adding that there was “scope for more”. It would also lead to the creation of more jobs, she added.
The Bharatiya Janata Party leader said that the increase in the foreign direct investment limit would pave the way for more foreign companies to enter the Indian market, the news agency reported. In many cases, foreign firms do not find local joint venture partners because of several reasons, she added.
With more companies, the competition will increase, leading to a drop in premiums, Sitharaman said.
Rejecting allegations by the Opposition that the Union government was in a haste to pass the bill, the minister said that consultations for it had taken place for nearly two years, PTI reported.
Opposing the bill in the Upper House, Congress MP Shaktisinh Gohil said that the increase in foreign direct investment had earlier been opposed by senior BJP leaders such as late Sushma Swaraj and Arun Jaitley, The Indian Express reported.
The BJP’s election manifesto for the 2014 Lok Sabha polls had also said that it would not allow foreign direct investment in the insurance sector, Gohil added.
Trinamool Congress MP Saket Gokhale said that no private insurer would be interested in a low premium, high risk rural market where protections were provided through government insurance schemes, the newspaper reported.
Noting that such schemes would be hampered if foreign players enter, Gokhale added the current profits of the state-owned Life Insurance Corporation came from its large market share but private companies were likely to enter with predatory pricing.
Opposition members also criticised the use of Hindi words in the title of the bill.
A demand by the Opposition to send the bill to a parliamentary panel was rejected.
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