INSURANCE FDI RULES

INSURANCE FDI RULES

Subject : Economy

Context : With the government defining the management and control criteria for Indian insurance companies last Wednesday through a gazette notification, the Finance Ministry expects the sector to be a key recipient of foreign capital.

Concept :

• New rules amends the Insurance Act, 1938 to increase the maximum foreign investment allowed in an Indian insurance company.
• It increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.
• While control will go to foreign companies, the majority of directors and key management persons will be resident Indians who will be covered by law of the land.

Significance

• Insurance penetration currently stands at just 3.71 per cent of the GDP in the country. Higher investments will help increase penetration of products in an underserved market.
• It will also bring in global best practices, besides helping lower the cost of products due to greater competition.