The government is set to introduce a comprehensive Bill during the ongoing Budget Session of Parliament to amend key insurance laws, including the LIC Act, the Insurance Act, and the Insurance Regulatory and Development Authority of India (IRDAI) Act. The proposed changes aim to grant more autonomy to the Life Insurance Corporation of India (LIC), introduce composite licensing in the insurance sector, and provide greater flexibility to the insurance regulator.
Financial Services Secretary M. Nagaraju announced on February 3 that the draft of the Bill has been finalized after consultations with stakeholders and will soon be sent to the Union Cabinet for approval. “We have consulted stakeholders and finalized the draft. It is likely to be introduced in the Budget Session. We will send it to the Cabinet after legal vetting and drafting. The Finance Minister has already approved it. If possible, it will be introduced in the Budget Session,” Nagaraju said.
Key Highlights of the Proposed Bill
- Greater Autonomy for LIC
A major focus of the amendments is to provide LIC with more operational independence. Currently, LIC requires government approval for routine functions such as opening new offices, recruiting staff, and implementing promotion policies. The proposed changes aim to remove these restrictions, allowing LIC to manage its operations more efficiently.
“LIC, if it wants to open an office, needs government approval. For recruitment, promotions, and normal operations, they must seek permissions. They should now take responsibility for these,” Nagaraju explained. - Composite Licensing
The Bill is expected to introduce composite licensing, which will allow insurance companies to offer multiple types of insurance products under a single license. This move is aimed at simplifying regulatory processes and encouraging innovation in the sector. - Enhanced Flexibility for IRDAI
The amendments will also provide the insurance regulator, IRDAI, with greater flexibility to adapt to changing market dynamics and ensure effective oversight of the sector. - Single Bill for Unified Reforms
Instead of introducing separate Bills for each amendment, the government has chosen to present a single Bill to ensure a synchronized approach to reforms in the insurance sector. “It will be one Bill so that the message to the insurance sector is unified,” Nagaraju stated.
Why These Reforms Matter
The proposed changes are part of the government’s broader vision to deepen insurance penetration in India, enhance regulatory efficiency, and foster competition within the sector. By granting LIC more autonomy, the government aims to enable the state-owned insurer to operate more like a competitive business entity. Similarly, composite licensing is expected to reduce bureaucratic hurdles and encourage insurers to expand their product offerings.
What’s Next?
Once the draft Bill is legally vetted and approved by the Union Cabinet, it will be introduced in Parliament during the Budget Session. If passed, the amendments could mark a significant shift in the functioning of the insurance sector, benefiting both insurers and policyholders.
The reforms are expected to streamline regulatory processes, reduce operational bottlenecks, and create a more dynamic and competitive insurance market in India. As the government pushes for faster implementation, all eyes are now on the Budget Session for the introduction of this landmark Bill.
