FinMin for broadening definition of insurance
Bringing a much needed clarity to the sector, the government has begun a review of the definition of ‘insurance’ that could help companies in related activities such as insurance broking and intermediaries bring in foreign direct investment through the automatic route.
The finance ministry has asked the department of industrial policy and promotion (DIPP), to review the definition, two officials familiar with the development said.
“The current definition of insurance in the FDI regulations is very narrow and activities like intermediaries and brokers are not included. In contrast, the insurance regulator IRDA considers these as a part of the insurance sector,” a senior official said.
Under existing guidelines, foreign direct investment up to 26 per cent is permitted in the insurance sector. But the DIPP — the nodal agency for forming policies on FDI — considers only life and general insurance companies as part of the insurance sector. In contrast, the IRDA includes intermediaries, insurance brokers and re-insurers as a part of the sector.
As a result, only life and general insurance firms can get in FDI up to 26 per cent through the automatic route. Other related firms such as insurance brokers and intermediaries have to seek clearance from the Foreign Investment and Promotion Board.
For example, the FIPB in January this year approved a proposal of Mahindra Insurance Brokers Ltd and Mahindra Financial Services to bring in foreign equity through FDI of Rs 80.41 crore.
Experts point out that a clarity in definition would make the foreign investment regime for
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