Be careful those who buy insurance, the government can take a big decision
Newz Fast, New Delhi: There has been a significant increase in insurance penetration, measured as a percentage of insurance premiums as a proportion of the Gross Domestic Product (GDP), mainly due to the COVID-19 pandemic.
Various types of medical insurance and life insurance are popular in the country. Now the Finance Ministry is discussing changes in the insurance laws to increase the reach of insurance in the country.
These include a proposal to reduce the minimum capital requirement. Insurance penetration in the country has increased from 3.76 percent in 2019-20 to 4.20 percent in 2020-21. This works out to an increase of 11.70 percent.
There has been a significant increase in insurance penetration, measured as a percentage of insurance premiums as a ratio of gross domestic product (GDP), mainly due to the COVID-19 pandemic.
May be appropriate change
Sources said that the ministry is undertaking a comprehensive review of the Insurance Act, 1938 and wants to make some appropriate changes for the growth of the sector. He said that this process is still in the initial stage.
Sources said the ministry wants to reduce the minimum capital requirement for starting an insurance business from Rs 100 crore. Reducing the minimum capital requirement will enable different types of companies to enter the insurance business like in the banking sector.
Increased access to insurance
Sources said that with the relaxation of this provision, micro insurance, agricultural insurance and insurance companies with regional orientation will also be able to get into the insurance business.
Sources said that the entry of new players will not only increase the reach of insurance but will also generate employment. The government last year amended the Insurance Act to increase the limit of foreign holding in an insurance company from 49 per cent to 74 per cent.
Privatization will open
Apart from this, the Parliament has passed the General Insurance Business (Nationalized) Amendment Bill, 2021. With this, the government can reduce its stake in an insurance company to below 51 percent of the equity capital. This will open the way for privatization.