The Lok Sabha has passed the Insurance Amendment Bill 2021 leading to a hike in foreign direct investment (FDI) limit in the sector to 74 percent. Rajya Sabha had passed the Bill on March 18.

This came as a stark contrast to the previous FDI hike that took seven years to be passed in 2015 hiking the limit from 26 percent to 49 percent.

Under the new structure of 74 percent FDI limit, the majority of directors on the boards and key management positions will be resident Indians with at least 50 percent directors will be independent directors. A specified percentage of profit will be retained as general reserve.

This means that Indian promoters in an insurance joint venture would have the right to accept or reject any board decision related to company matters. This is termed as Indian management control.

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In India  life insurance dominates the sector with a huge share of 74.7%, with non-life insurance accounting for the remaining 25.3%. In the non-life insurance sector, motor, health, and crop insurance segments are driving growth.

Low penetration and density rates: Low levels of penetration and density of insurance in India clearly imply that a large section of the population is still uninsured.

Deficient rural participation and life insurers’ skewed focus on urban areas: In terms of rural penetration, the share of rural business in total volume of insurance business is still low in India  

                   Based on the recommendations of the Malhotra Committee, the IRDA(Insurance Regulatory and Development Authority). was constituted as an autonomous body in 1999 and as a statutory body in 2000. The monopoly accorded to the Life Insurance Corporation in 1956 and the General Insurance Corporation in 1972 was revoked with the enforcement of the IRDA Act, 1999. In August 2000, the sector was opened up to private and  foreign players and  foreign companies were allowed  ownership of 26 per  cent . The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market .

                   The IRDAI is the  sole national  regulator of the insurance sector in  India. It is accountable  to Parliament via  the Department  of Financial  Services  at the  Ministry of Finance  of the Union Government. The main duty of the IRDAI is to regulate, promote, and ensure orderly growth of the insurance and re-insurance market (IRDAI. IRDAI’s  mission  statement  includes protection  and fair  treatment of  policyholders and  to set, promote, monitor  and enforce high standards of integrity, financial soundness, fair dealing and competence of those  it regulates