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I want to know with respect to following news
http://www.hindustantimes.com/business-news/WorldEconomy/Pension-insurance-get-FDI-boost/Article1-939798.aspx

http://www.dnaindia.com/india/report_we-will-oppose-fdi-in-pension-samajwadi-party_1748956

which says Indian Govt has allowed FDI in Insurance and pension funds, what does it means? What are the pros and cons of allowing FDI in investment and pension funds? Let me know what should I read or understand to be able to understand news of above kind. Thanks

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1 Answer

Insurance in India is offered by Private companies as well [ICICI, Maxbupa, SBI, Max and tons of other companies].

These are priavte companies, as Insurance sectors one has to look for long term stability, not everyone can just open an Insurance company, there are certain capital requirements. Initially the shareholding pattern was that Indian company should have a majority shareholding, any foreign company can have only 26% share's.

This limit has now been extended to 49%, so while the control of the private insurance company will still be with Indian's the foreign companies can invest upto 49%.

It's a economic policy decission and the outcome whether positive or negative will be known after 10 years of implemenation :)

Pro's:
- Brings more funds into the Insurance segment, there by bringing strength to the company
- Better global practise on risk & data modelling may reduce premium for most
- Innovation in product offering
- More Foreign Exchange for country that is badly needed.

Con's:
- The Global companies may hike premium to make more profits.
- They may come up with complex products that common man will not understand and will lead to loss
- They may take back money anytime as they are here for profit and not for cause.

Pension today is offered only by Government Companies. There is a move to allow private companies to offer pension. Today life insurance companies can launch Pension schemes, however on maturity the annuity amount needs to be invested into LIC to get an annuity [monthly pension].

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protected by John Bensin Sep 9 '13 at 6:49

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