In insurance sector, let the market work, Pg10

Key Highlights:

• The Lok Sabha passed the Sabko Bima Sabko Raksha (Amendment of Insurance Laws) Bill, 2025 on Tuesday.
• The bill amends the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the IRDAI Act of 1999.
• The bill aims to achieve IRDAI’s goal of “Insurance for All by 2047”.
• The bill increases the FDI limit in Indian insurance companies from 74% to 100%.
• The bill reduces the net owned funds requirement for foreign reinsurers from Rs 5,000 crore to Rs 1,000 crore.

Detailed Insights:

• India's insurance density has increased from $55 to $97 and insurance penetration from 3.3% to 3.7% of GDP over the past decade, but remains underserved.
• Increasing the FDI limit is expected to attract foreign investment, facilitate technology transfer, and increase insurance penetration and social protection.
• Easing norms for foreign reinsurers could attract smaller and new insurers, boosting competition and improving service in the Indian market.
• The bill enhances IRDAI’s punitive powers, similar to SEBI, including the authority to disgorge wrongful gains made by insurers or intermediaries.
• A key challenge will be ensuring that IRDAI’s increased powers do not stifle the growth of the insurance sector.

Key Concepts Involved:

• Insurance Density: The average insurance premium paid per person in a year.
• Insurance Penetration: Measured as the percentage of insurance premiums to GDP.
• Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country.