Lok Sabha passes Insurance Amendment Bill; 100 % foreign investment in insurance sector

NEW DELHI: The Lok Sabha has passed the Insurance Amendment Bill, titled 'Sab Ka Beema, Sab Ki Raksha', which allows 100 per cent foreign direct investment (FDI) in the insurance sector and introduces reforms in the public sector Life Insurance Corporation of India (LIC). The Bill was introduced on Tuesday morning and passed after a discussion in the evening. The government said the Bill aims to increase investment, diversify insurance business, and ensure coverage for all by 2047.

The government clarified that even with 100 per cent foreign investment, Indians will continue to hold key positions such as chairperson and managing director. The Bill also provides insurance coverage in new areas such as cyber, property, and marine sectors. It will allow the government to expand insurance business into more sectors, with separate licences for different areas. Indian insurance companies will be allowed to open branches abroad, while foreign reinsurance companies can open branches in India. Rules related to the transfer of shares in insurance companies have been simplified. Insurance companies will also be allowed to merge with other companies. However, the restriction on insurance companies doing business in more than one segment will continue, and the Bill does not support a composite licence for this purpose.

Amendments proposed by the opposition were rejected by a voice vote. The opposition had demanded that penalties on insurance companies violating rules be increased from Rs 1 crore to Rs 10 crore and that steps be taken to prevent companies from making excessive profits.

Opposing the Bill, MP K. Radhakrishnan said the new insurance law opens the sector to corporate interests while ignoring social security. He alleged that it would strengthen privatisation and foreign private company dominance and weaken LIC and public sector general insurance companies.

More powers for LIC The Bill allows LIC to set up additional zonal offices in cities such as Mumbai, Kolkata, Delhi, Kanpur, and Chennai without prior government approval, if required. LIC's board will have greater authority to make decisions related to branch expansion and recruitment. The Bill also states that sensitive information of policyholders should not be disclosed or shared with other agencies without the permission of the insurance company.

Powers of the Insurance Regulator

• The Insurance Regulatory and Development Authority of India (IRDAI) will have the power to decide on capital investment, mergers, and investment rules.
• It will also have the authority to decide commissions and remuneration for insurance agents.
• The penalties imposed on insurance companies will be used for policyholder awareness and for creating a protection fund.
• The tenure of the IRDAI chairperson and members will be five years or up to the age of 65, whichever is earlier, compared to the current age limit of 62.