Government studying proposal for higher FDI in insurance

Mumbai: The government is considering a proposal to increase foreign direct investment (FDI) in the insurance sector from 26 per cent to 49 per cent.

Under the present guidelines, a foreign joint venture partner in an Indian insurance company can hold up to 26 per cent stake. A proposal to increase the FDI limit is under consideration of the government, minister of state for finance P K Bansal told Lok Sabha in a written reply.

Though the government had proposed to raise the FDI limit in insurance sector in the 2004-05 budget, the bill to this effect has not so far been tabled in Parliament.

However, he said opening of the sector has resulted in entry of 24 new players in the insurance sector, including both life and non-life segments. Liberalisation has also increased insurance penetration, growth in premium underwritten, product innovation and employment generation, Bansal said.

In reply to another question, he said to give special focus to health insurance, Insurance Regulatory and Development Authority proposes to set up a separate Health Insurance Department.

Bansal said the IRDA has set up a pool for sharing third party motor insurance among all insurance companies transacting motor insurance business in the country. Effective January next year, the General Insurance Corporation of India (GIC) will act as the manager for the pool, he said.