Insurance for All by 2047: GIEAIA to GoI, proposal to allow 100% FDI in the insurance sector should be dropped
Kanwar Inder Singh/ royalpatiala.in News/ December 11,2024
General Insurance Employees’ All India Association (GIEAIA), Class I has written a letter to Secretary, Department of Financial Services, Government of India, highlighting the “Proposed Amendments in the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.”
Darshan Kumar Wadhwa, Secretary General, GIEAIA Class 1 has written to secretary, DFS, GoI “as proposed by the Ministry under your esteemed leadership, the afore mentioned Insurance Acts are set to be amended to facilitate greater penetration and to achieve the goal of Insurance for All by 2047. As one of the major Associations representing Class I, III and IV employees of Public Sector General Insurance (PSGI) Companies, with over 50% membership strength in all check-off exercises in Class III & IV since inception, we consider ourselves significant stakeholders in these companies. We wish to present our views as follows:
The draft proposal by your Ministry includes increasing the upper cap of FDI in the insurance sector from 74% to 100%, reducing the minimum paid-up capital for companies and permitting insurers to engage in multiple insurance-related activities. These amendments aim to ensure accessibility and affordability of insurance for citizens, foster industry expansion, and streamline business processes.”
Wadhwa added “however, we strongly believe that the proposal to allow 100% FDI in the insurance sector should be dropped. Past trends indicate that increasing FDI limits has not significantly contributed in improving insurance penetration in the country. Instead, FDI flows have primarily been profit-driven, with a focus on capital repatriation rather than serving the socio-economic needs of India. This raises serious concerns about the long-term impact on the stability and accountability of the insurance sector. We fear that allowing complete foreign ownership will further marginalize public sector insurers and compromise their role in serving the people, especially in rural and semi-urban areas where private insurers have historically shown limited interest.”
“Our experience suggests that the liberalization of the sector, which began on 29th December1999, followed by amendments to increase the FDI limit to 49% in December 2014 and further to 74% in February 2021—despite our consistent opposition—has not achieved the desired results. The insurance penetration rate stands at only 4% in 2023, a slight decline from 4.2% in 2022. Government data reveals that FDI utilization in the insurance sector to date is merely 32.67% of the current limit of 74%. Excluding PSU insurance companies, this figure rises only marginally to 36.56%, indicating limited demand for such capital” said Wadhwa.
GIEAIA spokesperson said “FDI often prioritizes profit generation and capital repatriation over serving the people and fostering national progress. It is proposed to reduce the Capital requirements cap from 100 Crore to 50 Crore and the sole authority has been given to IRDA to decide on case to case basis.It is also proposed that minimum net owned funds required for registration of FRBs will be reduced to INR 1000 crores from current INR 5000 crores.”
Again it also proposed to allow these insurance companies to do other business (other than insurance business).
“To our experience it will ultimately encourage mushrooming of the insurance sector like pre Nationalization era, when everyday there was entry of new companies and premature sudden closure, to facilitate mal practices and looting of public money.On the other hand, Public Sector General Insurance companies, under financial inclusion initiatives, have successfully expanded their base to Tier II and Tier III cities, as well as urban and semi-rural areas, thereby improving insurance accessibility. Private insurance companies, however, have largely refrained from venturing into these regions. This demonstrates the commitment and responsibility of PSU insurance companies toward the nation and its citizens. Moreover, public sector companies have a higher claim settlement ratio, averaging 90–95%, compared to 75–80% for private insurers, as per market data” added GIEAIA spokesperson
The association demanded “as a responsible trade union association, we firmly believe that strengthening PSU insurance companies is the key to achieving the goal of Insurance for All.
We, therefore, propose and demand the following measures:
- Merger of the four Public Sector General Insurance Companies to create a single, robust Monolithic Corporation.
- Infusion of adequate capital to expand operations and serve the underserved population through government social security schemes such as Pradhan Mantri Fasal Bima Yojana, Rashtriya Swasthya Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, Ayushman Bharat, Pradhan Mantri Jan Arogya Yojana, and other similar initiatives.
- Implementation of advanced technological support to enhance customer service.
- Recruitment across all employee cadres to improve the employee-to-insured ratio and deliver better customer service. We humbly request your kind intervention and introspection on these matters to ensure the realization of the ambitious goal of Insurance for All.
