Insurance Reforms in India
Insurance Reforms in India: FDI Cap to relax to 49 Percent
15 September, 2009, Business News - No Comment
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The Indian Government is keen on getting the current Foreign Direct Investment (FDI) cap raised from 26% so as to enable foreign investors up their stakes in insuranceorganisations in India. While the Insurance Regulatory Authority of India (IRDA) has been holding the FDI cap steady at 26%, there have been lobbying from various stake holders in the insurance industry to increase the scope of FDI to 49% for the past few years now.
Proposals to increase foreign companies’ stakes in Indian Insurance companies have been met with stiff resistance from the Left Wing parties who oppose a virtual “sell out” of Indian Insurance industry to foreign organisations. However, the move to increase FDI cap to 49% is widely expected in the industry, which has undergone major reforms over the past few years. While Life Insurance Corporation of India (LIC), the Public Sector Undertaking (PSU), held a monopoly over insurance products in India, the opening up of the sector to private players and to foreign investors gave rise to a flurry of activity in an industry that has enormous scopes for growth in an under-insured country. Multinational behemoths in Insurance have tied up with their Indian partners – Prudential has joined hands with ICICI, AIG has teamed up with TATA, Allianz with Bajaj, Sun with Birla – as they have been trying to gain market share.
With almost 20 insurance companies in operation in India, Insurance premiums of private sectors rose from Rs 272.6 crores in 2001 – 02 to Rs 51,561.4 crores for the year 2007 – 08. LIC still holds the king’s share with 149,790 crores of premiums collected in 2007 – 08, almost three times the total premium charged by all private organisations put together.
While rural insurance is an area that is yet to be exploited, a 10.3 percent service tax charged is considered detrimental to growth of the rural insurance
15 September, 2009, Business News - No Comment
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The Indian Government is keen on getting the current Foreign Direct Investment (FDI) cap raised from 26% so as to enable foreign investors up their stakes in insuranceorganisations in India. While the Insurance Regulatory Authority of India (IRDA) has been holding the FDI cap steady at 26%, there have been lobbying from various stake holders in the insurance industry to increase the scope of FDI to 49% for the past few years now.
Proposals to increase foreign companies’ stakes in Indian Insurance companies have been met with stiff resistance from the Left Wing parties who oppose a virtual “sell out” of Indian Insurance industry to foreign organisations. However, the move to increase FDI cap to 49% is widely expected in the industry, which has undergone major reforms over the past few years. While Life Insurance Corporation of India (LIC), the Public Sector Undertaking (PSU), held a monopoly over insurance products in India, the opening up of the sector to private players and to foreign investors gave rise to a flurry of activity in an industry that has enormous scopes for growth in an under-insured country. Multinational behemoths in Insurance have tied up with their Indian partners – Prudential has joined hands with ICICI, AIG has teamed up with TATA, Allianz with Bajaj, Sun with Birla – as they have been trying to gain market share.
With almost 20 insurance companies in operation in India, Insurance premiums of private sectors rose from Rs 272.6 crores in 2001 – 02 to Rs 51,561.4 crores for the year 2007 – 08. LIC still holds the king’s share with 149,790 crores of premiums collected in 2007 – 08, almost three times the total premium charged by all private organisations put together.
While rural insurance is an area that is yet to be exploited, a 10.3 percent service tax charged is considered detrimental to growth of the rural insurance