The government is expected to introduce a bill during the upcoming Budget session that seeks to amend the Insurance Act, 1938, aiming to achieve ‘Insurance for All by 2047’.
Key provisions of the amendment bill may include composite licenses, differential capital, reduced solvency norms, captive licenses, changes in investment regulations, one-time registration for intermediaries, and allowing insurers to distribute other financial products, sources said.
This move will enable the entry of differentiated insurance companies, similar to the banking sector which has universal banks, small finance banks, and payments banks. Composite licenses would permit life insurers to underwrite health or general insurance policies.
Currently, under the Insurance Act, 1938, life insurers can only offer life insurance, while general insurers can provide non-life products like health, motor, fire, and marine insurance. The Insurance Regulatory and Development Authority of India (Irdai) does not currently allow composite licensing, meaning an insurance company cannot offer both life and non-life products as one entity.
The draft bill is prepared and awaiting Cabinet approval, sources said, with the finance ministry hoping for its introduction in the upcoming session. The proposed amendments focus on enhancing policyholders’ interests, improving returns, facilitating the entry of more players, boosting economic growth and employment, enhancing operational and financial efficiencies in the insurance industry, and easing business operations.
In December 2022, the finance ministry invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory Development Act, 1999. The Insurance Act, 1938, provides the legislative framework for insurance in India, regulating the relationship between insurers, policyholders, shareholders, and the Irdai.
According to sources, easing capital norms could allow the entry of companies focused on micro-insurance, agriculture insurance, or regional insurance firms. The entry of more players is expected to increase penetration and create more jobs across India.
Currently, India has 25 life insurance companies and 32 general insurance firms, including the Agriculture Insurance Company of India Ltd and ECGC Limited.