
The government is poised to introduce a bill amending the Insurance Act, 1938, during the upcoming Budget session. This legislative move aims to achieve the goal of ‘Insurance for All by 2047’.
Composite License
The bill proposes the provision of composite licenses, enabling life insurers to underwrite health or general insurance policies. Currently, life insurers are restricted to offering only life insurance covers, while general insurers handle non-insurance products like health, motor, fire, and marine insurance.
Differential Capital and Solvency Norms
The amendments will introduce differential capital requirements and reduce solvency norms, making it easier for new players to enter the market.
Captive Licenses and Investment Regulations
Issuing captive licenses and changing investment regulations are also part of the proposed changes. These measures are expected to facilitate the growth and diversification of insurance companies.
One-Time Registration for Intermediaries
A one-time registration process for intermediaries will simplify operations, reducing bureaucratic hurdles.
Distribution of Other Financial Products
The bill will allow insurers to distribute other financial products, broadening their service offerings and increasing market reach.
Differentiated Insurance Companies
The move will enable the establishment of differentiated insurance companies, similar to the banking sector, which includes universal banks, small finance banks, and payments banks.
Easing Capital Norms
Easing capital norms will encourage the entry of companies focusing on micro-insurance, agriculture insurance, or firms with a regional approach. This will not only enhance insurance penetration but also create more jobs across India.
Operational and Financial Efficiency
The proposed amendments aim to enhance the efficiency of the insurance industry, both operationally and financially. This will improve policyholders’ interests and returns, and facilitate economic growth.
Legislative Process
The draft bill is ready and awaiting Cabinet approval. The finance ministry is hopeful that it will be introduced in the upcoming Budget session.
Stakeholder Engagement
In December 2022, the finance ministry invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory Development Act, 1999. These Acts provide the legislative framework for insurance in India and regulate the relationship between insurers, policyholders, shareholders, and the Insurance Regulatory and Development Authority of India (IRDAI).
Current State of the Insurance Sector
Currently, India has 25 life insurance companies and 32 non-life or general insurance firms. These include specialized entities like the Agriculture Insurance Company of India Ltd and ECGC Limited.
Conclusion
The proposed amendments to the Insurance Act, 1938, are a significant step towards achieving comprehensive insurance coverage by 2047. By enabling the entry of new players and enhancing operational efficiencies, these changes are expected to drive economic growth and job creation in the insurance sector.