The finance ministry on Wednesday invited comments on proposed amendments to the Insurance Act, 1938, and Insurance Regulatory and Development Act (IRDA), 1999.
According to the proposal, the government is scrapping the provision of the Insurance Act that stipulates the minimum capital of Rs 100 crore for life, general, and health insurance companies and Rs 200 crore for reinsurers. This move allows different kinds of insurers, including captives, to change the investment provisions.
Seeking comments from all stakeholders, the finance ministry said: "The proposed amendments primarily focus on enhancing the financial security of the policyholders, promoting policyholders' interests, improving returns to the policyholders, facilitating the entry of more players in the insurance market leading to economic growth and employment generation."
The government proposes to allow an insurer to provide services related or incidental to the insurance business and distribute other financial products as specified by and subject to regulations.
It further said that the aim is to enhance efficiencies of the insurance industry- operational as well as financial and enabling ease of doing business. One of the proposed amendments is that an insurer can start any class or sub-class of insurance business if it has a minimum paid-up equity capital as may be specified by regulations-depending on the size and scale of operations, class or sub-class of insurance business, and the category or type of insurer.
Says Sumit Rai, Managing Director (MD) and CEO of Edelweiss Tokyo Life Insurance: "The proposed changes to the Insurance Amendment Act are aligned with the regulator's vision of 'Insurance For All'. These changes will facilitate the longer-term growth of the industry and bring India closer to global practices. A further easing in distribution norms will enable insurers to offer comprehensive service to their customers by catering to their overall financial needs and optimally utilize a large distribution infrastructure."
"It will also help companies tap into newer market segments and reach new customers. In the current environment, where customer expectations are fast evolving and being enriched by digital platforms, these changes will allow companies to provide a uniform yet personalized service. These proposed reforms are a huge positive step and will lead to higher insurance adoption at the last mile," adds Rai.
The government also proposed the sectoral regulator, Insurance Regulatory and Development Authority of India (IRDAI), in the place of a statutory provision, the power to prescribe the minimum capital required considering the size and scale of operations, class or sub-class of insurance business and the category or type of insurer. In addition, the government has also proposed to reduce the amount of net owned funds required for an insurer to be registered from Rs 5,000 crore to Rs 500 crore.
The government has proposed to give IRDAI the power to specify the qualifications and experience necessary to appoint an actuary by an insurer. The government has also proposed stipulating the minimum amount of motor third-party insurance policies to be underwritten by standalone motor insurance companies that may be set up.
