Insurance (Amendment) Bill 2021
Please see below the excerpt from The Insurance (Amendment) Bill, 2021:
|1||Bill Introduction date||15.03.2021|
|2||Subject||The Insurance (Amendment) Bill, 2021|
|3||Bill Pass date||18.03.2021|
|4||Effective date||It shall come into force on such date as the Central Government by notification in the Official Gazette, appoint.|
|5||Applicability||Insurance Act, 1938|
The insurance (amendment) Bill, 2021 was passed in the Lok Sabha on Monday, March 22, 2021. Rajya Sabha has already passed the bill last week on March 18, 2021. The Bill amends the Insurance Act, 1938.
The Act provides the framework for functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, its shareholders, and the regulator (the Insurance Regulatory and Development Authority of India).
The Bill seeks to increase the maximum foreign investment allowed in an Indian insurance company.
· The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.
· The Act requires insurers to hold a minimum investment in assets which would be sufficient to clear their insurance claim liabilities. If the insurer is incorporated or domiciled outside India, such assets must be held in India in a trust and vested with trustees who must be residents of India. The Act specifies in an explanation that this will also apply to an insurer incorporated in India, in which at least: (i) 33% capital is owned by investors domiciled outside India, or (ii) 33% of the members of the governing body are domiciled outside India. The Bill removes this explanation.
More capital at dispense: The FDI limit increase is also expected to provide access to fresh capital to some of the insurance companies, which are struggling to raise capital from their existing promoters.
Better solvency: This would not only increase the solvency position for some insurers but would provide long-term growth capital for other companies to invest in newer technologies.
Insurance penetration: These technologies would not only help in managing losses but also in customer acquisition and thus insurance penetration.
Technological impetus: The additional funds could be used to invest in technology to adapt to the evolving customer needs like responsive service through digital platforms.