FDI in Insurance Sector

Context
The Union Finance Ministry has released a consultation paper proposing to increase the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%. This move is part of the government’s broader efforts to enhance the growth and accessibility of the insurance sector in India.

Background and Overview

1. Previous FDI Reforms

   • The FDI limit in the insurance sector was previously raised from 49% to 74% in February 2021, which allowed greater foreign participation.

2. Consultation and Review

   • The proposal is based on a comprehensive review of the legislative framework, conducted in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and other stakeholders in the industry.

   • The key objective is to make insurance more accessible and affordable for citizens, and foster the expansion of the insurance industry.

Key Features of the Proposed Amendment

1. Raising the FDI Cap

   • The proposal seeks to increase the FDI limit in insurance companies from 74% to 100%, which will encourage greater foreign investment in the sector. The idea is to bring in more capital, expertise, and global best practices to the Indian insurance market.

2. Reduction in Net Owned Funds for Foreign Reinsurers

   • The proposal also suggests reducing the Net Owned Funds (NOF) requirement for foreign reinsurers from ₹5,000 crore to ₹1,000 crore. This aims to make it easier for foreign players to enter the market.

3. Empowering IRDAI for Capital Adjustments

   • The IRDAI will be empowered to specify lower capital requirements (not less than ₹50 crore) for entering underserved or unserved segments of the insurance market, to encourage insurers to cater to rural or niche markets.

4. Open Architecture for Insurance Agents

   • The proposal introduces an open architecture for insurance agents, allowing them to tie up with multiple life, general, and health insurance companies. This will provide customers with more options and encourage agents to expand their reach.

Importance of FDI in the Insurance Sector

1. Boost to the Economy

   • FDI in the insurance sector will bring in capital, technology, and management expertise, enhancing productivity and innovation in India’s insurance industry.

   • This will also generate employment opportunities in sectors such as financial services, distribution, and claim management.

2. Fostering Competition and Innovation

   • With foreign investments, the sector will benefit from advanced technologies, better management practices, and new financial products, driving greater competition and innovation.

3. Addressing the Capital-Intensive Nature of the Sector

   • The insurance sector is capital-intensive, and the infusion of foreign funds will be crucial in achieving the target of increasing insurance penetration across India.

Need for the Proposed Amendments

1. Low Insurance Penetration

   • Insurance penetration in India remains relatively low, with the overall ratio of premiums to GDP standing at only 4% in FY23, a slight decline from 4.2% in FY22.

   • To double insurance penetration, the sector needs an annual infusion of approximately ₹50,000 crore.

2. India’s Uninsured Population

   • Despite significant growth, a large portion of India’s population remains uninsured, leaving them vulnerable to financial risks. Expanding insurance coverage could help save up to USD 10 billion annually by insuring currently uninsured individuals and assets.

3. Insurance for All by 2047

   • The IRDAI aims to achieve its mission of “Insurance for All by 2047”, and these reforms are part of a strategic plan to tackle the sector’s challenges and improve accessibility, especially in underserved segments.

Challenges Faced by the Insurance Sector

1. Low Insurance Penetration

   • Despite steady growth, awareness about the benefits and types of insurance products remains limited, particularly in rural and semi-urban areas.

2. Claims Settlement Issues

   • Delays, rejections, and lack of transparency in the claims process have resulted in customer dissatisfaction and eroded trust in the system.

3. Limited Distribution Reach

   • The insurance distribution network is largely urban-centric, and there is a lack of reach in rural areas, which limits the sector’s ability to serve a broader base of customers.

4. Affordability and Accessibility

   • High premiums, combined with the underpricing of some insurance products, make it difficult for low-income groups to access coverage.

5. Fraud and Mis-selling

   • Fraudulent claims and mis-selling by insurance agents have significantly damaged consumer trust and hindered the industry’s growth.

6. Health Insurance Gaps

   • Health insurance coverage is limited, and the increasing costs of medical care have made it challenging for many to afford comprehensive health insurance.

7. Rising Costs

   • As medical and claims costs rise, both affordability and profitability for insurers become critical challenges.

Way Forward for the Insurance Sector

1. Increase Financial Literacy

   • Educational programs aimed at enhancing understanding of insurance products among the population will help boost demand, particularly in underserved areas.

2. Simplify Regulations

   • Streamlining regulatory processes will allow for faster product approvals, which can help meet the demands of a growing market.

3. Improve Claims Settlement Processes

   • Faster, transparent claims processing is needed to build consumer confidence and reduce disputes.

4. Expand Distribution Networks

   • Leveraging digital platforms and mobile technology to expand the distribution network will help insurers reach rural and semi-urban areas.

5. Enhance Health Insurance Coverage

   • Expanding health insurance coverage to include critical illnesses, hospitalization, and post-treatment care will make policies more comprehensive and accessible.

Conclusion

The proposal to allow 100% FDI in the Indian insurance sector reflects the government’s commitment to driving sectoral growth and enhancing accessibility. By inviting greater foreign investment, the sector will benefit from the influx of capital, expertise, and technological advancements. However, achieving the goal of “Insurance for All by 2047” requires addressing the systemic challenges such as low penetration, claims settlement issues, and distribution limitations. With the right regulatory measures and an emphasis on financial literacy and innovation, India can significantly enhance its insurance coverage, improving the economic security of its population.

PM-WANI: Prime Minister's Wi-Fi Access Network Interface

The Prime Minister's Wi-Fi Access Network Interface (PM-WANI) framework is gaining attention for its role in enhancing internet accessibility across India. With 246,993 hotspots installed as of November 2024, the initiative has become a crucial part of India’s Digital India mission, aimed at providing widespread and affordable internet access, especially in rural and underserved areas.

What is PM-WANI?

• Launch and Purpose:
  The PM-WANI framework was launched in 2020 by the Department of Telecommunications (DoT) to expand public Wi-Fi hotspots across India. The focus is on increasing internet access in rural areas, where connectivity is often limited.

• Key Objective:
  PM-WANI seeks to enable local businesses (such as shopkeepers, small enterprises) to set up Wi-Fi hotspots, which will allow them to provide affordable internet to customers. The initiative supports the National Digital Communications Policy (NDCP) 2018's goals of digital inclusion and affordable broadband access.

• Key Features:

  • The framework allows local businesses to act as Wi-Fi providers without needing licenses or incurring fees, promoting ease of doing business.

  • It enhances internet access, fosters digital inclusion, and drives innovation by enabling communities to access the internet affordably.

PM-WANI Ecosystem

1. Public Data Office (PDO):

   • PDOs are responsible for establishing, maintaining, and operating PM-WANI-compliant Wi-Fi hotspots.

   • They provide last-mile connectivity by procuring internet bandwidth from telecom or internet service providers (ISPs) and delivering broadband services to subscribers.

2. Public Data Office Aggregator (PDOA):

   • PDOAs provide aggregation services such as authentication, authorization, and accounting to PDOs, facilitating their ability to deliver services to consumers.

3. App Provider:

   • App Providers develop an application that allows users to find nearby PM-WANI hotspots, register them, and authenticate them for internet access.

4. Central Registry:

   • Managed by the Centre for Development of Telematics (C-DoT), the Central Registry maintains details of PDOs, PDOAs, and App Providers to ensure transparency and system integrity.

Centre for Development of Telematics (C-DoT)

• C-DoT is an autonomous Telecom R&D (Research and Development) center under the Department of Telecommunications (DoT), established in 1984.

• C-DoT is responsible for developing new telecommunication technologies and has been instrumental in advancing the PM-WANI framework.

National Digital Communications Policy (NDCP), 2018

The NDCP, 2018 aims to transform India into a digitally empowered economy by enhancing digital infrastructure and services.

Key Goals:

• Universal Broadband Access: Ensuring internet access for all citizens.

• Job Creation: Creating four million jobs in the sector.

• GDP Contribution: Increasing the Digital Communications sector's GDP contribution to 8%.

• Digital Sovereignty: Ensuring secure and accountable digital communications.

Key Features:

• Providing 50 Mbps broadband for every citizen.

• Ensuring connectivity in uncovered areas.

• Attracting USD 100 billion in investments.

• Training one million individuals in New Age Skills, such as data science, AI, and IoT.

• Expanding the Internet of Things (IoT) ecosystem.

• Strengthening data protection and ensuring accountability in digital communications.

Wi-Fi Hotspot Targets:

• The NDCP, 2018 set a target of deploying 10 million public Wi-Fi hotspots by 2022, but India only achieved 0.5 million hotspots by the deadline.

• The Bharat 6G Vision aims to target 50 million public Wi-Fi hotspots by 2030, which will require substantial growth in infrastructure and reduced connectivity costs.

Significance of PM-WANI

1. Digital Inclusion:

   • PM-WANI plays a pivotal role in ensuring that the digital divide between urban and rural areas is bridged by providing easy access to the internet in remote areas.

2. Promoting Digital Economy:

   • By enabling small businesses to act as Wi-Fi providers, PM-WANI helps in creating a digital economy at the grassroots level, fostering entrepreneurship and job creation in underserved areas.

3. Fostering Innovation:

   • The scheme helps promote technological innovation by ensuring that a larger portion of the population has access to affordable internet, which is essential for digital learning, e-commerce, and start-up culture.

4. Supporting the Digital India Mission:

   • As part of the broader Digital India mission, PM-WANI aligns with the government's goal to transform India into a knowledge-based society, where access to information and services is widespread and equitable.

Challenges and Way Forward

• Target Achievement:
  The ambitious targets set under NDCP, 2018 for Wi-Fi hotspots have not been met, highlighting challenges in infrastructure development and the need for reduced costs and more aggressive rollout strategies.

• Future of Public Wi-Fi:
  The Bharat 6G Vision envisions significant growth in the number of public Wi-Fi hotspots. To meet this goal, collaboration between the government, private sector, and local businesses is essential to overcome connectivity challenges, ensure affordable internet services, and build stronger digital infrastructure across India.

Conclusion

PM-WANI is a crucial initiative aimed at expanding internet access, promoting digital inclusion, and driving economic growth in rural and underserved areas. While India has missed its initial Wi-Fi rollout target, the framework remains integral to the government’s broader efforts to provide affordable and reliable internet for all. The success of this initiative will depend on meeting future challenges and achieving ambitious connectivity goals in the coming years.

Eklavya Platform: Online Learning for the Indian Army

Why in News?

The Ministry of Defence has launched the Eklavya platform, an online learning platform aimed at improving the professional education and training of Indian Army officers. This initiative is part of the Decade of Transformation (2023-2032) and aligns with the 2024 theme: Year of Technology Absorption.

Key Features of Eklavya Platform:

• Aim:
  The primary goal of Eklavya is to enhance the professional education and training of Indian Army officers, ensuring they are well-equipped to meet modern challenges. This initiative falls under the broader Decade of Transformation (2023-2032) initiative, which seeks to modernize and upgrade the Indian Army's training infrastructure.

• Developed By:
  The platform has been developed by Bhaskaracharya National Institute of Space Applications and Geoinformatics (BISAG-N), based in Gandhinagar. BISAG-N is known for providing ICT-based solutions for educational and geospatial applications.

• Content Available:
  The platform hosts a total of 96 courses from 17 Category ‘A’ Training Establishments of the Indian Army. The courses are divided into three categories:

  1. Pre-course Preparatory Capsules:
     These are designed to transition basic offline physical courses to online formats, allowing officers to complete preparatory work before attending physical sessions.

  2. Appointment/Assignment Related Courses:
     These courses are focused on specific assignments and roles, covering areas like:

     • Information Warfare

     • Defence Land Management

     • Financial Planning

     • Discipline and Vigilance

  3. Professional Development Suite:
     This suite offers courses on:

     • Strategy

     • Operational Art

     • Leadership

     • Organisational Behaviour

     • Emerging Technology (e.g., AI, cybersecurity)

• Centralised Knowledge Hub:
  The platform features a "Knowledge Highway", a searchable hub that consolidates:

  1. Journals

  2. Research papers

  3. Articles
     All of these resources are accessible from a single platform, creating a comprehensive knowledge repository for Army officers.

Significance of Eklavya Platform:

• Enhanced Training and Learning:
  The platform enables flexible learning for Indian Army officers, allowing them to complete courses at their own pace and from remote locations. This is especially crucial for officers who might not have easy access to training establishments.

• Support for Decade of Transformation:
  This initiative supports the Decade of Transformation by fostering technology absorption and enabling a more modernized and agile Army through technology-driven education.

• Strategic Capacity Building:
  The platform will equip Indian Army officers with skills and knowledge related to modern warfare, leadership, strategy, and emerging technologies, thereby strengthening India’s defense capabilities.

• Unified Learning System:
  By centralizing various training resources and creating a single platform for education, Eklavya offers a streamlined approach to professional development, ensuring that the content is current and relevant to evolving defense needs.

Conclusion:

The Eklavya platform represents a significant step forward in modernizing the Indian Army's training infrastructure. By leveraging digital tools for education and training, it enables the Army to absorb new technologies, increase the efficiency of its officers' training, and improve overall defense readiness in a rapidly changing global environment. This initiative supports the Decade of Transformation vision and aligns with the Year of Technology Absorption in 2024, helping the Indian Army maintain its strategic edge.

Grievance Redressal Assessment and Index (GRAI) 2023

The Ministry of Personnel, Public Grievances and Pensions (MoPP&P) has launched the Grievance Redressal Assessment and Index (GRAI) 2023 to evaluate and enhance the grievance redressal systems of various central ministries and departments in India.

Key Features of GRAI 2023:

1. Purpose:

   • GRAI 2023 aims to assess and improve the grievance redressal mechanisms in the central ministries and departments to ensure better service delivery to citizens.

   • The initiative is based on recommendations from the Parliamentary Standing Committee of MoPP&P to improve transparency and efficiency in public grievance handling.

2. Conceptualized By:

   • The Department of Administrative Reforms and Public Grievances (DARPG) conceptualized the GRAI as part of its efforts to strengthen e-governance and improve public service delivery.

3. Evaluation Criteria:

   • GRAI 2023 is based on four dimensions and 11 indicators:

     1. Efficiency

     2. Feedback

     3. Domain

     4. Organizational Commitment

   • These dimensions help assess the performance of 89 central ministries and departments in handling public grievances.

4. Data Source:

   • The assessment is based on data collected from the Centralized Public Grievance Redressal and Management System (CPGRAMS), a 24/7 online platform that enables citizens to lodge grievances related to service delivery by public authorities.

   • CPGRAMS is widely recognized as a best practice by the Commonwealth Secretariat for ensuring transparency in public administration.

5. Results:

   • 85 out of 89 ministries showed an improvement in their GRAI scores compared to the previous year.

   • 10% of ministries achieved more than 50% growth, while 28% of ministries recorded a growth of 25-50% in their grievance redressal scores.

6. Benefits of GRAI:

   • Comparative Analysis: GRAI allows ministries and departments to compare their grievance handling performance, leading to increased accountability and efficiency.

   • Public Confidence: The initiative promotes better citizen engagement by enhancing transparency in grievance redressal.

   • E-Governance: By using digital platforms like CPGRAMS, the government can efficiently handle public grievances and ensure that citizens’ issues are addressed promptly.

About CPGRAMS:

• CPGRAMS (Centralized Public Grievance Redress and Management System) is an online platform that enables citizens to:

  • Lodge grievances on a range of issues related to public service delivery.

  • Track the status of their complaints.

  • Ensure accountability from public authorities regarding grievance resolution.

• 24/7 Availability: It is available round the clock, providing a convenient and accessible channel for citizens to voice their concerns.

Conclusion:

The Grievance Redressal Assessment and Index (GRAI) 2023 is a significant step towards improving the transparency, accountability, and efficiency of public grievance redressal mechanisms in India. The positive growth in GRAI scores among most ministries highlights the government's commitment to enhancing the quality of service delivery and citizen satisfaction. The use of CPGRAMS plays a crucial role in streamlining the grievance process, ensuring better outcomes for the public and reinforcing the Digital India initiative.

Global Wage Report 2024-25: ILO

The International Labour Organization (ILO) has released its Global Wage Report 2024-25, offering an in-depth analysis of global wage trends, wage inequality, and real wage growth across different regions and countries.

Key Highlights of the Global Wage Report 2024-25:

1. Decrease in Wage Inequality:

   • Wage inequality has decreased globally at an average rate of 11.1% per annum since 2000 in about two-thirds of all countries.

   • This reduction is attributed to various social and economic policies implemented globally, although disparities remain.

2. Increase in Global Wages:

   • Global wages have been growing faster than inflation in recent times, signaling positive trends in wage growth.

   • Real wages grew by 1.8% in the past year, and projections for 2024 indicate a 2.7% increase, marking the highest growth in over 15 years.

3. Regional Disparities:

   • Africa, Northern America, and parts of Europe saw stagnant or even negative real wage growth.

   • Emerging economies showed stronger wage growth compared to advanced economies.

4. Persistent Inequality:

   • Low-income countries face significantly higher levels of wage inequality compared to high-income nations.

   • About 22% of workers in low-income countries earn less than half the median hourly wage.

5. Decoupling Between Productivity and Wages:

   • Despite a 29% rise in productivity in high-income countries between 1999 and 2024, real wages have only increased by 15%.

   • This highlights the failure to equitably share the productivity gains with workers, especially in wealthier nations.

6. Gender Wage Gap:

   • Women, particularly in lower-middle-income countries, continue to suffer from wage inequality due to overrepresentation in informal, precarious, and low-paid work.

Indian Scenario:

• Declining Low-Paid Workers:

  • Between 2008 and 2018, both the shares of low-paid wage workers and low-paid non-wage workers in India declined at an average annual rate of 6.3% and 12.7%, respectively.

  • Low-paid wage workers in India, those earning less than 50% of the median hourly wage, now stand at 9.5%, showing positive progress.

• Comparative Wage Data in South Asia:

  • In India, the percentage of low-paid workers (9.5%) is comparable to:

    • Pakistan: 9.4%

    • Nepal: 10.5%

    • Bangladesh: 11.2%

    • Bhutan: 13.7%

    • Sri Lanka: 25.9%

• Recovery After Setback:

  • The global wage growth in 2024 marks a recovery after a negative global wage growth rate of -0.9% in 2022.

Suggestions for Policy Improvement:

1. Minimum Wage Adjustments:

   • Minimum wage policies need to be more responsive to inflation, particularly to protect low-wage earners from rising living costs.

2. Stronger Worker Protections:

   • Strengthening worker protections, policies, and regulations to address precarious and insecure forms of work.

3. Closing the Gender Wage Gap:

   • More comprehensive action is needed to close the gender wage gap and ensure equal pay for work of equal value.

About the International Labour Organization (ILO):

• Established: In 1919 as part of the Treaty of Versailles, marking the end of World War I. It became the first specialized UN agency in 1946.

• Membership: 187 Member States.

• Mission: The ILO aims to promote decent work for all women and men, setting labor standards, developing policies, and devising programs for better labor conditions worldwide.

• Tripartite Structure: It is the only tripartite UN agency that brings together governments, employers, and workers to discuss labor issues.

• Headquarters: Located in Geneva, Switzerland.

• Major Reports:

  • World Employment and Social Outlook (WESO)

  • Global Wage Report

  • World Social Protection Report

  • World Employment and Social Outlook for Youth

  • World of Work Report

Conclusion:

The Global Wage Report 2024-25 reveals encouraging growth in wages globally, though substantial wage inequalities remain. The findings emphasize the need for policy adjustments, particularly in areas of minimum wage responsiveness, worker protections, and gender equality. As India continues to show improvements in wage equality, targeted reforms will help further reduce disparities and enhance the living standards of its workers.