The Insurance Laws (Amendment) Bill that allows 49% of FDI (foreign direct investment) in the insurance businesses in India finally got the necessary Parliamentary nod last week. The entire insurance market in India is hopeful the new foreign direct investment ceiling will give a big push to the industry and health care sector.
The Bill was first brought by the Congress-led UPA government in 2008, but due to strong opposition of the BJP arguing it will have adverse impact on Indian economy, had been pending in the upper house of the Parliament (Rajya Sabha).
Now, since the Bill has got the Parliamentary nod, it is considered as one of the first major economic reforms of Modi’s government. However, different insurance employees’ unions were not in favour of increasing FDI limit in insurance from 26%.
But according to experts from the sector, the investment starved Indian insurance sector will get new life after the Bill is passed. The sector needs huge investment in order to boost insurance penetration and insurance market as well.
So far health insurance sector is concerned; the conception is that the industry will attract huge investment and new players as well that would help industry grow. The move will bring more competition in the market; leads to facilitate customers get cheaper pricing and more options.
The new Bill defines health insurance business as a separate entity, means more focus on the segment. So far, it was a part of the general insurance business. Now a health insurance policy will provide coverage of illness benefits on account of domestic and international travel as well. However, it doesn’t mean that all indemnity insurance policies will necessarily provide worldwide coverage. Some plans will still be restricted to provide coverage in India only.
According to the new Insurance Bill, setting up of a new health insurance company in the country will now require Rs. 50 crores only, as of now, it was Rs. 100 crores. This deduction may help setting up small-sized insurance players in the country.