The Insurance (Amendment) Bill, 2021


The Insurance (Amendment) Bill, 2021

Status of the Bill: The Insurance (Amendment) Bill, 2021 was introduced in the upper house (council of states) on March 15, 2021 and was approved and transferred to the Lower House (House of the People). The bill has also passed by the Lok Sabha and finally, it is sent to receive the assent of the President.

The bill shall become an Act after it receives the assent of the President.

Ministry concerned: Corporate Affairs

The Insurance (Amendment) Bill, 2021 was introduced in Rajya Sabha by the Minister of Corporate Affairs, Ms. Nirmala Sitharaman.

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Objective of the Insurance (Amendment) Bill, 2021

The main objective of the Bill is to raise the limit of the foreign investment in Indian insurance companies from the existing 49% to 74%.

Key features of the Bill

● Regulation: The Act (The Insurance (Amendment) Bill, 2021) provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, its shareholders, and the regulator (the Insurance Regulatory and Development Authority of India).

● Foreign investment: Presently, as per the provisions of the principal Act (Insurance Act, 1938) the foreign investors can hold up to 49% of the capital in an Indian-based insurance company only under the ownership and control of the Indian entity.

However, this Bill rectifies this limit of shares/percentage and increases the foreign Investment from 49% to 74%. It also removes the restriction caps related to ownership and control of the company.

● Investment of assets: The Insurance (Amendment) Bill, 2021 makes some prescriptions to the insurers. An insurer is a person or company that is responsible to settle the claim of the insured party.

The Act requires insurers to hold a minimum investment in assets which would be sufficient to clear their insurance claim liabilities. If the insurer is incorporated or domiciled outside India, such assets must be held in India in trust and vested with trustees who must be residents of India.

Further, the bill provides for the omission of the Explanation to sub-section (7) of section 27 of the Insurance Act, 1938. See a copy of this Act here.

Delegated legislation: Clause 4 of the Bill seeks to amend section 114 of the Insurance Act, 1938, which provides that the Central Government make rules for the conditions and manner of foreign investment under sub-clause (b) of clause (7A) of section 2.


The bill allows the capital of investors to acquire from the existing 49% to 74% which will create foreign domination in the Indian insurance company.

It also poses some threats to the interests of the Indian people if the foreign investors are interested in materials more than the insured person's claim.  

Way forward

  • Foreign investment may increase more infusion by dispensing more capital to the Indian insurance companies that cease to exist.
  • Enables scope for potential long-term growth.
  • Technological upgradations to weak insurance companies.