Second-generation insurance reforms on horizon
When he resumed charge of the finance ministry, P Chidamabaram held a slew of meetings with the insurance regulator and captains of the industry in October 2012. Also, at a meeting in Singapore recently, the finance minister told the global community that the government was committed to seeking parliamentary approval for increasing the FDI limit in the insurance and pension sectors to 49% from the current ceiling of 26%.
The reforms introduced in 1999 were focussed more on opening up of the sector, enabling private players to enter and for attracting FDI to support this highly capital-intensive industry. The new regulations served the industry well and, over a period of time, the country witnessed entry of as many as 44 insurance entities. The contribution of the sector to the GDP increased to a record 5.1% in 2009-10, up from 2.9% in 1999. In the life sector, the number of intermediaries rose to a high of 2.9 million. As a result, the sector experienced a boom similar to the telecom sector during the best period of the economic reforms.
The industry reclaimed its role in the economy as an important component of development strategies. During 2010-11, however, the trend started weakening after almost a decade of fabulous growth in market penetration, distribution reach and product innovation.
The last two years were quite frustrating and the possibility of a revival seemed remote till the finance minister made the policy of the government