COVID19 reiterated need for adequate insurance in a stern manner. Taking stalk of the situation, the Finance Minister has hiked Foreign Direct Investment (FDI) to the sector from 49% to 74%.
Previously in 2015, the government had hiked FDI for insurance sector from 26% to 49%.
Finance Minister Nirmala Sitharaman in Union Budget 2021-2022 Speech on Monday said:
“I propose to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% in insurance companies and allow foreign ownership and control with safeguards.”
The government had already allowed 100% FDI in insurance intermediaries i.e. entities such as insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors.
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Ours is largely an underinsured nation. The stats are dismaying. Despite COVID 19 health emergency, life insurance penetration in India is 3.6% of the GDP which is much lower than the global average of 7.13%. Thus, focus on insurance as a sector in Budget 2021 is a welcome step. It will augment foreign inflows and help insurance companies to foster customer friendly products and services according to growing business needs.
The step can indeed be a game changer and would definitely strengthen the sector by improving penetration of insurance in the country.
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