This move by the cabinet will give a boost to the insurance sector.
The union cabinet yesterday approved an increase in FDI for the insurance sector to 49 percent from 26 percent. The industry has been waiting for this approval since a long time.
“It is a step in the right direction. The hike in FDI will definitely give a boost to the insurance sector,” said a senior official from ICICI Prudential Life Insurance.
Simultaneously, the cabinet also cleared amendments aimed at attracting investments and bringing in more transparency to the insurance industry.
To encourage health insurance in India, the capital requirement for a health insurance company is now proposed at Rs 50 crore instead of Rs.100 crore for general insurance companies, thereby reducing the entry barrier to this priority sector within the insurance space.
The government has also revised the definition of ‘health insurance business’ to clearly stipulate that health insurance policies would cover sickness benefits on account of domestic as well as international travel.
The public sector general insurance companies and the GIC will be permitted to raise capital from the market to meet future capital requirements, provided that the government’s shareholding does not fall below 51 per cent at any point of time.