Budget 2024: The government is expected to introduce a bill amending the Insurance Act, 1938, during the upcoming Budget session to achieve the goal of 'Insurance for All by 2047'. Sources indicated that the amendment bill could include provisions such as composite licenses, differential capital requirements, a reduction in solvency norms, issuance of captive licenses, changes in investment regulations, one-time registration for intermediaries, and permission for insurers to distribute other financial products.
The sources added that the draft bill is ready and needs Cabinet approval. The Finance Ministry hopes it will be introduced in the upcoming session.
Changes if amendment bill passes
This initiative will allow the introduction of differentiated insurance companies, similar to the banking sector, which is currently categorised into universal banks, small finance banks, and payments banks.
The provision of composite licenses would allow life insurers to underwrite health insurance or general insurance policies. Currently, the Insurance Regulatory and Development Authority of India (IRDAI) does not allow composite licensing for insurance companies, which means that an insurance company cannot offer both life and non-life products as one entity.
As per the provisions of the Insurance Act, 1938, life insurers can only offer life insurance covers, while general insurers can offer non-insurance products like health, motor, fire, marine, etc.
"The proposed amendments primarily focus on enhancing the policyholders' interests, improving returns to the policyholders, facilitating the entry of more players leading to economic growth and employment generation, enhancing efficiencies of the insurance industry - operational as well as financial and enabling ease of doing business," sources said.
According to the sources, the relaxation of capital norms could potentially facilitate the entry of companies specializing in micro-insurance, agriculture insurance, or those focusing on regional markets within the insurance sector. This increased competition could enhance insurance penetration and stimulate job creation across India.
India has 25 life insurance companies
Currently, India has 25 life insurance companies and 32 non-life or general insurance firms. This includes entities such as the Agriculture Insurance Company of India Ltd and ECGC Limited among others.
The Finance Ministry sought feedback in December 2022 on proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory and Development Act, 1999.
The Insurance Act, 1938, serves as the foundational legislation governing the insurance sector in India. It establishes the framework for insurance operations, regulating interactions between insurers, policyholders, shareholders, and the Insurance Regulatory and Development Authority of India (IRDAI).
(With PTI inputs)
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