Source: BT
Context: The Union Budget 2025-26 proposed raising the FDI limit in the insurance sector from 74% to 100%, aiming to attract global investments and achieve the goal of ‘Insurance for All by 2047’.
About the Insurance Sector:
- What is the Insurance Sector?
- A critical component of the financial services industry, providing risk protection through life, health, and general insurance products.
- Plays a vital role in economic stability by offering financial security against unforeseen events.
- Global Status:
- India is the 10th largest insurance market globally and the 2nd largest among emerging markets.
- Expected to become the 6th largest market by 2033, surpassing countries like Germany and Canada.
- The market is projected to reach USD 222 billion by 2026.
- Insurance Density:
- It is the ratio of premiums collected by insurance companies to the country’s population
- Increased from USD 11.1 in 2001 to USD 95 in 2023-24.
- Life Insurance Density: Stable at USD 70.
- Non-Life Insurance Density: Rose from USD 22 to USD 25.
- Insurance Penetration:
- It is the percentage of a country’s insurance premiums to its gross domestic product (GDP).
- It’s a measure of how developed a country’s insurance sector is.
- Declined from 4% in 2022-23 to 3.7% in 2023-24.
- Life Insurance Penetration: Fell from 3% to 2.8%.
- General Insurance Penetration: Remained at 1%.
- LIC and Market Composition:
- Life Insurance Corporation (LIC): Holds 62.58% market share in new business premiums (FY23).
- Private Sector: Market share in general and health insurance rose from 48.03% in FY20 to 62.5% in FY23.
Key Reforms in Budget 2025-26:
1. FDI Limit Increased to 100%:
o Aimed at attracting global investors and fostering innovation.
o Condition: Companies must invest the entire premium in India.
2. GST Rationalization: Current GST rate of 18% on insurance premiums remains unchanged, but discussions are ongoing for potential reductions.
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