Indian Union Budget 2021-22: The FM, in her Budget speech, announced several measures for the insurance sector, which are likely to ease the problems the sector faces: dearth of capital, depressed insurance penetration and density rates, and dominance of public sector insurers.
The insurance sector has traversed through many phases, starting with nationalisation. Life insurance was nationalised in 1956 with the Life Insurance Corporation of India, followed by general insurance in 1972. In 2000, the sector was opened up as 26% ownership was allowed to foreign companies, and increased to 49% in 2015; this Budget raised FDI to 74%.
Insurance is a capital-intensive sector, and insufficient capital has been a challenge facing insurers in India. Raising FDI to 74% with adequate safeguards in place is expected to bring in requisite capital for stoking the growth of the sector, in line with the expectations of the industry.
Source: Financial Express
