The Centre has proposed several amendments to the Insurance Act and Insurance Regulatory & Development Authority Act as part of its overall efforts to enhance insurance penetration, encourage product innovation and diversification so as to achieve the goal of ‘insurance for all’ by 2047.

These proposals — once adopted after receipts of public and stakeholder comments — are likely to find their way to an Insurance Amendment Bill. Alternately, these could form part of Finance Bill 2023 as part of Budget, sources said. 

On the anvil are a slew of big reforms including introduction of concept of “composite insurance license”; captive insurers; differential minimum capital requirements after opening up registration to various classes, sub classes and types of insurers; allowing services to insurers that are incidental or related to insurance business; and allowing insurers to distribute other financial products as specified by IRDAI.

The latest proposals — which have been exposed  by the Department of Financial Services in the Finance Ministry for comments by December 15 – are intended to among other things facilitate entry of more players in insurance market leading to economic growth and employment generation and enabling ease of doing business.

COMPOSITE LICENSING 

Once composite licenses are allowed under law, insurers can undertake  life, general or health insurance under one entity. Prospective insurers can even apply for sub-class of business like accident, health and motor insurance.

With composite licensing framework, a life insurer can enter into general insurance or health insurance business. It will also work vice-versa with general insurance players being allowed to take up life or health insurance. 

Anil PM, Head - Legal, Compliance and Fraud Prevention Unit, Bajaj Allianz Life Insurance, said :”The proposal for a composite insurer will align Indian insurance with global markets. Such an insurer will be able to meet the multiple insurance requirements of a customer (life/health/property)”.

‘OTHER FINANCIAL PRODUCTS’

Once distribution of other financial products is legally allowed, insurers may get to distribute financial products like loans, fixed deposits, mutual funds or even insurance products of other segments. 

This could open a new revenue stream for insurers, but much would depend on the products that would be approved by IRDAI for this purpose.

This proposal is going to benefit insurers who have already a well built ‘agency network’, which could soon be leveraged for cross sell of other financial products once the law is amended, say insurance industry observers.

Meanwhile, insurance industry sources said the proposals to expand distribution channels could potentially open the door for life insurers to distribute indemnity-based health products in the days to come. As on date, life insurers are allowed to distribute only benefit-based health insurance products. 

Sumit Rai, MD & CEO, Edelweiss Tokio Life Insurance said, “The proposed changes to the Insurance Amendment Act are aligned with the regulator’s vision of ‘Insurance For All’. These changes will facilitate longer term growth of the industry and bring India closer to the global practices. A further easing in distribution norms will enable insurers to offer comprehensive service to their customers by catering to their overall financial needs, and optimally utilise a large distribution infrastructure. It will also help companies tap into newer market segments and reach new customers. In the current environment, where customer expectations are fast evolving and being enriched by digital platforms, these changes will allow companies to provide a uniform, yet personalised service to customers. These proposed reforms are a huge positive step and will lead to higher insurance adoption at the last mile.”

MINIMUM CAPITAL REQUIREMENTS 

The Centre, after consultation with insurance regulator IRDAI, proposes to do away with earlier norm that required a minimum capital of ₹100 crore for life, general and health insurers, and ₹200 crore for reinsurers.

Now, the minimum capital will be decided by IRDAI depending on the scale and size of operations of the new insurer. 

CAPTIVE INSURERS

The concept of captive insurers is proposed to be introduced whereby such companies (which carry on the class of general insurance business or any of its sub classes) can serve exclusively the general insurance needs of holding companies, subsidiaries or associates. 

Other amendments proposed include allowing the Wholetime members of IRDAI to hold office till 65 years. Currently they are allowed to hold office only till the age of 62 years. 

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