IMPACT OF FOREIGN DIRECT INVESTMENT ON

LIFE INSURANCE SECTOR IN INDIA

One of the most remarkable development during the last two decades

is the spectacular growth of Foreign Direct Investment (FDI) in the global

economy. It is an optimistic move for the future of Indian Life Insurance

Sector. Since this sector need huge amount of capital investment which can

be done effectively only through increase in FDI and it enhance the overall

performance of insurance sector. It also plays an important role in the

economic development of the country. It gives a win-win circumstance to the

host and the nations of origin. The two nations are straight forwardly inspired

by welcoming FDI, in light of the fact that they would get a great deal of

advantages from such kind of venture. FDI is the process whereby the

residents of one country acquire ownership of assets for the purpose of

controlling the production, distribution and other activities of a firm in another

country. Insurance is an equitable transfer of a risk of loss from one entity to

another in exchange for payment. Insurance in India is a growing and

flourishing industry with both international and national players competing

and growing at rapid rate. Before privatization, life insurance was only

provided by the LIC of India. They have monopoly in life insurance sector.

But after liberalization period, Life Insurance sector has started gaining new

shapes wwith newer innovation. Big brands like Reliance, Birla, ICICI, Tata,

HDFC, Aviva etc. have tied up with Foreign Insurance partners. FDI in

Insurance sector increases the penetration of insurance in India. Innovative

insurance product and services, better use of technology, increase in

employment and competition etc. are the by products of increase in FDI in

insurance sector. Government of India through Insurance Regulatory and

Development Authority of India (I.R.D.A.I) and RBI need to keep regular

check on the out flow of India currency. India is growing economy and foreign

investors may consider it an attractive country for investment in mainly to its

fast growing and changing insurance market. The cabinet of Narendra Modi

has approved the hike of the FDI in the insurance sector from 26% to 49%.

The parliament has passed Insurance laws (amendment) Bill, 2015. The

amendment bill aims to bring improvement and revision in the existing law

relating to insurance business in India. IRDA is in favour of an increase in

Foreign Equity Capital in Insurance Joint Ventures. The insurance division

assumes a critical part in the financial improvement by giving different

valuable administrations like preparing reserve funds, advancing speculation,

balancing out monetary markets and overseeing both the social and monetary

hazards. Understanding the capability of protection segment in activating the

investment funds for the profitable utilization and social well being,

government has made different steps to enhance its quality, reach and fame.

With target to give protection cover to all, the Govt. presented Pradhan Mantri

Suraksha Bima Yojana (PMSBM) to bring more individuals under the

insurance cover. Hence, with the increase in FDI insurance sector in India is

taking the benefits of better exposure to technology and other services from
foreign and density, increase in employment opportunities and increase in

wide and innovative insurance products and services in India.