Insurance intermediaries now to do business in all Special Economic Zones

Domestic and foreign insurance intermediaries can now set up shops in all Special Economic Zones (SEZs).

“For the purpose of regulating and promoting the insurance business in Special Economic Zones, the Authority (Insurance Regulatory and Development Authority of India) may permit an intermediary or insurance intermediary registered with the Authority, under section 42D of the Insurance Act, 1938 (4 of 1938), or an intermediary or insurance intermediary from outside the country, to transact business as an intermediary or insurance intermediary in the Special Economic Zones,” said a Finance Ministry notification on ‘Insurance Regulatory and Development Authority of India (Regulation of Insurance Business in Special Economic Zone) (Amendment) Rules, 2020’.

Rules for insurance business in SEZs were first notified in 2015. It allowed insurers to do business in SEZs but did not mention anything about insurance intermediaries. Later, IRDAI issued guidelines for intermediaries to work in International Financial Service Centre (IFSC), but it was limited to one particular area and not all SEZs. With this new notification, the government has now brought in clarity on the matter. Now, the insurance regulator will come out with detailed guidelines while Income Tax Department is expected to clarify on matter such as tax benefits.

An Insurance Intermediary means individual agents, corporate agents including banks and brokers who intermediate between the customer and the insurance company, web aggregators, insurance repositories insurance marketing firm, insurance self-network platform and point of sales. Insurance Intermediary also includes Surveyors and Third Party Administrators but these intermediaries are not involved in procurement of business. Surveyors assess losses on behalf of the insurance companies. Third Party Administrators provide services related to health insurance for insurance companies.

The notification has laid out three conditions for setting up businesses for insurance intermediaries. Firstly, an intermediary will set up its place of business in a SEZ with the prior approval of the IRDAI. Secondly, such permission may include approval for acting as intermediary or insurance intermediary for soliciting / procuring / servicing of insurance business, as the case may be, from entities within the SEZ and outside India subject to the provisions of the Special Economic Zones Act, 2005. And thirdly, acting as intermediary or insurance intermediary within the SEZ will be in accordance with the guidelines of the IRDAI.

Exemptions

Expectation is that the new rules will help insurance businesses to expand business domestically as well as globally. Also, as the government is hoping for businesses to shift from China and Hong Kong, such regulations will also help foreign insurance intermediaries to set up shop in India. Last September, the government amended rules to remove cap on foreign equity investment for intermediaries or insurance intermediaries. Also, FDI proposals will be allowed under the automatic route subject to verification by the Authority and the foreign investment in intermediaries or insurance intermediaries.

COMMENT NOW