Insurance company stocks rose after the Finance Ministry proposed to increase the FDI (Foreign Direct Investment) limit in domestic insurance companies from 74 per cent to 100 per cent. Apart from this, the Finance Ministry suggested that insurance companies should be allowed to provide all types of insurance services.

Proposal to increase FDI- It is proposed to allow 100% FDI in the insurance sector through automatic route.

Finance Ministry has issued consultation paper, sought opinion by 10 December. It is necessary for the company making foreign investment to have its office in India. There will be exemption for doing one or more insurance business. It is proposed to reduce the limit of net owned fund for foreign re-insurers from Rs 5000 crore to Rs 1000 crore, IRDAI is allowed to fix the minimum capital limit. There is a proposal to change the Insurance Act, Life Insurance Act, IRDA Act. If approved, this move will allow insurance companies to provide life, general and health insurance policies under one entity. Rise in stocks- Insurance companies like New India Assurance Company, LIC, General Insurance Corporation of India and others have registered a gain of up to 15.5 percent in the last week. In an interview with CNBC-TV18, former Insurance Regulatory and Development Authority of India (IRDAI) member Nilesh Sathe said the move could pique the interest of global insurance companies and lead to increased market penetration and acquisitions of Indian insurance companies. "Existing players are keen to increase their stake to 100 per cent, and many life and general insurance companies that are very big globally have not yet entered India," he told CNBC-TV18. IRDAI chairman Debashish Panda had earlier said that allowing 100 per cent FDI in insurance as well as integrated licenses would enable foreign players to plan their business independently, bring in global expertise, as well as increase capacity and technology, Panda feared that if the industry continues to depend only on domestic capital, a 'crowding out effect' could emerge in the insurance sector. ... Let us tell you what is FDI i.e. Foreign Direct Investment? How is it different from other foreign investments? Foreign Direct Investment (FDI) is an investment made by a company or individual of one country... or for a matter related to a business located in another country. Generally, FDI is considered when an investor leaves his country and starts a business operation abroad. He starts a business and invests money. Under this, he buys land abroad, sets up a plant and gives jobs to local people.