Finance Minister Proposes Raising FDI Limit in Insurance Sector from

Finance Minister Proposes Raising FDI Limit in Insurance Sector from 74% to 100%

The Finance Minister has proposed increasing the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%. This enhanced limit will apply to companies that invest the entire premium in India. To implement this change, the government will need to amend the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the Insurance Regulatory and Development Authority Act of 1999.

Significance of 100% FDI in the Insurance Sector:

• Increased Investment: Attracts more foreign capital for growth and expansion.
• Enhanced Competition: Promotes better products, services, and competitive pricing.
• Technological Advancements: Encourages the adoption of advanced technologies and innovative products.
• Improved Penetration: Expands insurance coverage and helps achieve the target of ‘Insurance for All’ by 2047.

Status of India’s Insurance Sector (Economic Survey 2024-25):

• Total insurance premiums grew by 7.7% in FY24, reaching Rs. 11.2 lakh crore.
• Insurance penetration decreased from 4% in FY23 to 3.7% in FY24.
• Insurance density increased from USD 92 in FY23 to USD 95 in FY24.

Insurance penetration refers to the percentage of insurance premium relative to GDP, while insurance density is the ratio of premium to the population (per capita premium).

Challenges Faced by the Insurance Sector in India:

• Absence of Top Companies: 20 of the world's top 25 insurance firms are not currently operating in India.
• Economic Constraints: Affordability remains a barrier to broader insurance adoption.
• Cultural Preferences: There is a strong preference for traditional financial practices over insurance products.

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