The Union Cabinet approves FDI hike in Insurance Laws (Amendment) Bill, 2008 from 26% to 49%.
Insurance Laws (Amendment) Bill, 2008
Following are the major changes approved by Union Cabinet –
1- Raises Foreign Direct Investment limit in the insurance sector to 49% from 26%
Cabinet approved to hike the FDI ceiling in the insurance sector to 49 per cent from the present 26 per cent. The approved amendments include that the foreign equity cap is proposed to be kept at 49 per cent as provided in the Insurance Laws (Amendment) Bill, 2008, as against the 26 percent.
The above new decision will not apply to Government-owned companies such as Life Insurance Corporation (LIC) and the five PSU General Insurance companies.
2- Public sector insurance co can get listed, but the Govt stake at least 51%
The state-owned general insurance companies and GIC will, however, be permitted to raise capital from the market to meet future requirements, provided the Government’s shareholding does not fall below 51 per cent at any point.
3- Lloyds of London and Foreign Re insurer allowed to set up operations in India
Allows foreign re-insurers and other specialist insurer like Lloyds set up operations in India.
4- Clearly defines the health insurance business
The government has also revised the definition of ‘health insurance business’ to clearly stipulate that health insurance policies would cover sickness benefits on account of domestic as well as international travel.
5- Capital requirement for a health insurance co is changed to Rs. 50 Crore
The capital requirement for a health insurance company is now proposed at Rs 50 Crore (against Rs 100 crore for a general insurance company) to reduce entry barriers to a priority sector in the insurance space.
6- Period for repudiating insurance policy capped at three years
The period during which a policy can be repudiated on any ground, including misstatement of facts, has been confined to three years from the commencement of the policy. Thus, no policy can be called in question on ground of misstatement after three years.
7- Improve the functioning of surveyors
To improve the functioning of surveyors and bring in greater transparency, certain modifications are made to provide for regulations on qualifications regarding appointment of surveyors and to strengthen the Institute of Indian Insurance Surveyors and Loss Assessors (IIISLA).
But nothing is going to change for retail buyer in short term, it will first go to parliament – first to Lok Sabha and then Rajya Sabha. So wait for some more time, till it will pass.