On 12 March 2015, in a major boost to the government’s reform agenda, the Rajya Sabha gave the go-ahead to the insurance Bill, thus putting Parliament’s seal of approval on the legislation, which seeks to raise the overseas investment cap in insurance companies to 49% from 26%.
The Lok Sabha had approved the Bill on 4 March.
The passage of the Bill by Parliament cleared the air of uncertainty that had taken root after the government was forced to enact ordinances when it failed to get legislative backing for the insurance reform and other key legislative measures.
The move to increase the foreign investment cap in insurance companies will kick-start the industry, which had been struggling for lack of capital. It would also boost infrastructure funding since only an insurance corpus can fund long-gestation public works projects.
While raising the overseas investment cap, the insurance Bill carries a rider that management control would be in Indian hands. The higher foreign investment ceiling will be a composite cap and could include both foreign direct investment (FDI) and portfolio investment.
The insurance Bill also gives more powers to the insurance regulator—the Insurance Regulatory and Development Authority of India—like deciding on commissions and imposing higher penalties on companies for any irregularities. The new law will also hold the insurance companies responsible for any wrongdoing by their agents.