General Awareness

April 04, 2017 @ 01:15 PM

April 04, 2017 @ 01:15 PM

K. J. Somaiya Institute of Management Studies and Research, Mumbai

9 Easy Steps to register for SIMSR (Infographic)

Download Now

General Awareness Topic - FDI in Insurance: Threat or Opportunity

 Published : Wednesday, 06 August, 2014 11:42 AM  
MBA aspirants must be updated with General Awareness on current topics. General awareness topics with analytically drawn conclusions will benefit you in Essay writing  / GD & PI. Today, you will read General Awareness Topic: FDI in Insurance: Threat or Opportunity
As the government had announced to introduce the Insurance Laws (Amendment) Bill in the current session of Parliament and can even call for a joint session of Parliament to get the bill passed, vehement opposition is reported from various quarters including political parties, trade unions and obviously from employees union of life and general insurance companies. The amendment bill seeks to increase the Foreign Direct Investment (FDI) limit in Insurance sector by up to 49 percent.
The insurance sector was opened up for private sector in 2000 after the enactment of the Insurance Regulatory and Development Authority Act, 1999. This Act permitted foreign shareholding in insurance companies to the extent of 26 per cent with an aim to provide better insurance coverage and to augment the flow of long-term resources for financing infrastructure
Currently, 26 percent FDI is permitted under automatic route. FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time. If the bill is passed, FDI between above 26 percent and up to 49 percent will be permissible through automatic route.
Various stake holders have criticised the move on various grounds. For instance, left parties criticised the move arguing that presence of private FDI in insurance sector will jeopardize stability of financial market but they didn’t explained how it will jeopardize financial market. Bhartiya Mazdoor Sangh (BMS, trade union supported by BJP) opposed increase in FDI because according to them only Indian insurance companies stand strong while the US insurance company became bankrupt during financial crisis. However, the proponents of FDI cite following benefits –
  • The insurance sector is investment starved. Several segments of the insurance sector need an expansion. The move will bring the much needed long-term capital into the companies
  • If the higher foreign direct investment limit is raised in insurance sector, it could result in inflows of INR 40,000-60,000 crore over time.
  • Lack of funds has limited the ability of these companies to increase insurance penetration. Life insurance penetration in India is about 3.2 percent of gross domestic product in terms of total premiums while the global average is 8 percent. Higher FDI limit could help in deepening the insurance penetration in India.
  • FDI could help in job creation in the sector. Higher capital will help insurance companies to tap under-insured markets through better infrastructure and more manpower.
  • The higher FDI limit in insurance would also be beneficial for the pension sector. The Pension Fund Regulatory Development Authority (PFRDA) Bill ties the FDI limit in pension sector to that of the insurance sector.
  • Investors generally invest in insurance and pension products on a long-term basis and this money could help fund infrastructure projects, which requires long-term funding.
  • New companies will infuse efficiency, new products and competition in the market.
However, any new move must also answer the concerns of different stake holders. Failure of AIG in US has no analogy in India because the US market is very little regulated while Indian market is well regulated by Insurance Regulatory and Development Authority (IRDA). There are some genuine risks with the move, but with regulatory infrastructure in place, a risk which comes with INR 60,000 crores, efficiency, new products etc is worth welcoming.  
Stay informed, Stay ahead and stay inspired with MBA Rendezvous

Crucial Dates, You Should not Miss

TAPMI, Manipal
Admission Application closes on January 16, 2018 for 2018-20
BIMTECH, Greater Noida
Admissions open for PGDM Programmes at BIMTECH. Apply Now !
Lal Bahadur Shastri Institute of Management
Admissions are Open at LBSIM, Delhi. Apply Now !
FORE School of Management
Apply for PGDM & PGDM-IB Programmes. Application Deadline is December 22, 2017.
Goa Institute of Management
PGDM Admissions Open at GIM. Apply Before January 5, 2018
Last Date to Apply for MBA (Full Time) Programme at NIRMA is January 09, 2018
XAT 2018
Application Last Date 15th December 2017 ( With Late Fee )
IMI New Delhi
Application closes 4th December 2017
XIM Bhubaneshwar
Last Date 8th December 2017
SIBM Bengaluru
Apply for SNAP 2017 to be held on Dec 17 and apply for SIBM-Bengaluru through the SNAP Form
Institute of Rural Management Anand
IRMASAT will be conducted on February 4,2018, Apply Before December 31,2017
IBSAT 2017
Last date for IBSAT registration is December 12 , 2017
SIBM Hyderabad
Apply for SNAP 2017 to be held on Dec 17 and apply for SIBM-Hyderabad through the SNAP Form
Institute of Public Enterprise
Last Date to Apply for IPE, Hyderabad is 31st December 2017
K J Somaiya Institute of Management Studies & Research, Mumbai
Last date for Application is 31st Jan, 2018
Application for PGDM 2018-20 at SDMIMD is open till February 28, 2018
MDI Murshidabad
Applications for PGPM 2018-20 at MDI Murshidabad are open

Admission Open Now

Following Colleges are accepting applications.


Admissions open for 2018-20

PGDM, PGDM (HRM), PGDM(B & FS), Executive PGDM

Apply Online