Seeking to attract more foreign investment, the government has relaxed FDI norms for insurance sector by permitting overseas companies to buy 49 per cent stake in domestic insurers without prior approval. Currently, FDI up to 26 per cent is permitted through automatic approval route. For FDI up to 49 per cent, the approval of Foreign Investment Promotion Board is required. “The foreign investment proposals up to 49 per cent of the total paid up equity of the Indian insurance company shall be allowed on the automatic route subject to verification by the Insurance Regulatory and Development Authority of India,” said a Government notification. There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in the general insurance. During April-December 2015, FDI into the country grew by 40 per cent to USD 29.44 billion.

The Health Ministry prepared a Rs. 15,000-crore action plan to launch a National Health Protection Scheme that will offer insurance coverage of up to Rs. 1 lakh to economically and socially backward people. J P Nadda, Health Minister said that though the Budget allocation for the health insurance scheme was Rs. 1,500 crore, the annual spending for it could be Rs. 4,500 crore. The scheme would be rolled out in 2017 and the initial corpus of funds allocated would be used for setting up an IT-enabled platform.

Insurance Regulatory and Development Authority (IRDAI) Thursday said an insurer should necessarily assess the credit risk of any buyer who contributes more than 2 percent of the total turnover of the policyholder while revising guidelines regulating the credit insurance business. The insurance regulator said that in the recent times, changes in economy, especially in micro, small, medium enterprise sector, have increased the need for trade credit and has enhanced the scope for the credit insurance sector, manifold. Therefore, in order to give fillip to the growth of credit insurance market, IRDAI said it is necessary to revisit the 2010 guidelines which regulate the credit insurance business in India. "A trade credit insurance policy shall not be issued to banks/ financiers/ lenders... An insurer shall necessarily assess the credit risk of any buyer who contributes more than 2 percent of the total turnover of the policyholder," said the revised guidelines. Listing out the conditions for trade credit insurance, it further said a trade credit insurance policy should not be issued to banks, financiers or lenders. "A trade credit insurance policy can be sold to seller on whole credit turnover basis only, covering all buyers. "However, if the seller prefers to take credit insurance cover for a particular segment/product/or country, the same shall be allowed provided the cover is taken for the whole credit turnover of all buyers of that particular segment/ product or country," it said. Also, a trade credit policy should not grant an indemnity of more than 85 per cent of the trade receivables from each buyer. A policyholder should be obliged under the policy to notify adverse information about the buyer to the insurer, said the guidelines which supersede the 2010 norms. Trade credit insurance means insurance of suppliers against the risk of non-payment of goods or services by their buyers against non-payment as a result of insolvency. IRDAI also insurer should have internal risk management guidelines to assess "trade credit risk on the buyer, giving credit limits on the buyer and buyer credit limit review".

The massive flood in Chennai and adjoining areas in Tamil Nadu turned out to be costly for the insurance companies, saddled with claims touching close to Rs 5,000 crore. "For the entire insurance industry, the losses are about Rs 5,000 crore. For National Insurance at gross it will be Rs 300 crore," company's chairman and managing director K Sanath Kumar said here today. "At the company level, the net hit to us will be anywhere between Rs 80 and Rs 90 crore. The industry thought loss would not be more than Rs 500 crore after the November flood, but the second round of flood in December was severe causing the major damage," NIC director & General manager M Vasantha Krishna said. Besides loss of lives, according to estimates, some 80,000 vehicles, four and twowheelers combined, are estimated to have been damaged in the deluge. According to reports, 2015 was one of the worst in aviation losses for insurance companies in India. Eight private jets owned by corporate houses were damaged in the Chennai floods last December that could cost up to Rs 500 crore for the general insurance players.

Budget 2016 had many announcements for the insurance sector, that are expected to offer more options to the insurance buyers in India. “The budget proposal to launch a new health protection scheme will ensure penetration of health insurance and promote financial inclusion. The proposal for additional Rs 30,000 health cover for senior citizens will help reduce the burden of healthcare expenditure for the aged,” says Sandeep Patel, MD &CEO; of Cigna TTK Health Insurance Company. The scheme should offer a helping hand to those 'Below Povery Line families' who are not covered by any health insurance scheme. It was widely demanded by insurance sector that the service tax on the insurance products should be removed. Finance Minister has heard this demand, though partially. Service tax on service of life insurance business provided by way of annuity under the National Pension System regulated by PFRDA will be exempted with effect from 1st April 2016. These services attracted a composite rate of tax at 3.5%. EPFO services too will be exempt from service tax, which are taxed at 14%. Composite rate of service tax on single premium annuity policies being reduced from 3.5% to 1.4% of the premium charged, with effect from 01.04.2016. Service tax on the services of general insurance business provided under ‘Niramaya Health Insurance Scheme' launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability will be exempted, with effect from 01.04.2016. Extant premium attract service tax at 14%. A cut in service tax on the insurance policies should reduce the premium for these policies. This makes them affordable. Union Budget 2016 announced Government has approved the path breaking Crop Insurance Scheme- Prime Minister Fasal Bima Yojana. For effective implementation of this scheme a sum of Rs 5,500 crore is provided by Finance Minister. Finance Minister also announced that public sector general insurance companies will be listed on stock exchanges. There was a popular demand to increase the tax deduction limit of Rs 50000 to Rs 2 lakh under section 80C of the Income Tax Act. However, there is no such increase announced by the finance minister.

The insurance regulator has simplified the claim process by removing the contribution clause to a considerable extent. Earlier, with the contribution clause, you had to notify all your insurers who would contribute to the cover amount in the ratio of the sum assured. Now, you can approach any of your insurers to settle the claim. If you have two insurers – A and B who have a sum assured of Rs 2 lakh each and your claim amount is Rs 2 lakh – you can claim the amount from either of your insurers.