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Parliament Clears Insurance Laws (Amendment) Bill, 2015
Mar 16, 2015

Parliament paved the way for 49% foreign investment in the insurance sector as Rajya Sabha passed the Insurance Laws (Amendment) Bill, 2015 on March 13. The Lok Sabha had passed the Bill on March 4.The bill, stuck in Parliament for seven years will replace an ordinance that was promulgated last December.

The Rajya Sabha took up discussion on the bill after initial reservations from the opposition benches about an identical bill remaining pending with the house. The issue was sorted when the Government took back the earlier bill pending in the House since 2008. The bill should have been passed in 2008. But due to various factors it got postponed.

Salient Features

  • Raising the FDI cap would not only bring successful and large insurance companies to the Indian market but would also be vital for infrastructure development.

  • 26 per cent foreign capital will be under the automatic route, the balance 23 per cent has to secure approval from the Foreign Investment Promotion Board (FIPB).

  • There is a regulation that 15% of the premium paid for insurance will go into infrastructure development.

  • For the insurance industry the passing of the bill will help in putting in place a more progressive regulatory framework.

  • The FDI/FPI limit increase will lead to capital inflows which could be used to expand distribution and to invest technology and service infrastructure.

  • Public sector general insurance companies would be allowed to raise funds from the capital market.

  • Startup capital for health insurers would be Rs.100 crore

  • Life Insurance Council and the General Insurance Council will act as self-regulating bodies

  • Legal recourse to individual customers against insurers.

  • Flexibility in paying premium through instalments, faster claim settlement, simpler policies, capping on agents’ commissions and consumer redressal.

  • Foreign reinsurers will be allowed to open branch offices in India.

  • With the bill being cleared investment of around Rs.200 billion is likely to come over the next few years.

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