Reform-FDI tango in insurance
(Source – The Hindu, International Edition – Page No. – 13)
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Topic: GS3 – Indian Economy |
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Context |
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Condition on Investment of Premium
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The 100% FDI limit applies only if all premium funds are invested within India.
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Since insurers cannot invest policyholders’ funds abroad, further clarification is needed.
Past Changes in FDI Limits
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In 2015, the FDI limit increased from 26% to 49%, but insurers had to remain Indian-owned and controlled.
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In 2021, the limit rose to 74%, removing the Indian ownership condition.
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Companies with over 49% FDI must have Indian resident directors and key management personnel (KMPs).
Impact of FDI in Insurance Intermediaries
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Increased Foreign Investment: Raising the FDI limit to 100% allows more foreign companies to invest in Indian insurance intermediaries.
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Technology and Expertise: Foreign investors bring advanced technology, global expertise, and better management skills.
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More Competition: New players entering the market increase competition, leading to better services for customers.
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Improved Efficiency: Advanced technology and global practices improve operational efficiency.
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Increase in Foreign Interest: Strict rules on profit repatriation and transactions have discouraged some foreign investors.
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Sector Growth: More investment can help expand the insurance sector, benefiting the economy.
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Practice Question: How does increasing the FDI limit to 100% in insurance intermediaries impact the sector? Highlight the benefits and challenges associated with this move. (150 Words /10 marks) |
