Insurance (Amendment) Bill, 2024, if passed, will allow the state-owned insurers to obtain a holistic license to sell both life and non-life products, avoid amendment in the Life Insurance Corporation Act and General Insurance Business (Nationalization) Act, 1972 of 1956.
Public sector life and general insurers are currently governed by separate parliamentary acts.
“This provision, included in the final draft after consultation consultation, eliminates the need to amend the LIC Act and Gibana, paves the way for the expansion of the broader industry and improves the access to insurance for all citizens,” the first person said, “requested for oblivion.
A overall license will allow a single unit to offer both life and non-life products, unlike now, when these two activities are to be done by individual corporate institutions, the person said. “Community insurers are also allowed in courts like Singapore, Malaysia and UK.”
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Divided industry
The overall license proposal initially divided the industry, some saw it as a progressive step. The state-run general insurers opposed the concerns of the market fragmentation and the entry of non-serious or economically weaker players.
However, the revised changes have gained support by incorporating safety measures to address these concerns.
Four PSU General Insurance are United India Insurance, National Insurance, Oriental Insurance and New India Assurance. Of these, only New India assurance is beneficial. The only listed PSU General Insureer reported net profit 1,129 crore in FY24.
The consultant process is completed and the draft bill has been finalized for cabinet approval. It is likely to be introduced during the budget session for parliamentary approval and later implementation, the other person mentioned above said.
The Finance Ministry has finalized the bill after a comprehensive public and stake consultation process, during which a response of more than 1,000 pages was received.
State governments were also consulted, and some of their suggestions have been included, the other person mentioned above said.
“As a result of this procedure, there is no need for any further changes as a result of a strong, progressive and forward -looking law and can proceed directly to parliamentary approval by the government coming after the elections,” the person said.
A spokesman of the Finance Ministry and the Secretary of the Department of Financial Services did not respond to the email.
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FDI limit to increase
Reforms of the insurance sector mentioned in the Bill include a historical provision to allow 100% foreign direct investment (FDI), increasing the cap by 74%.
The move is expected to attract significant capital flows, promote development, to operate economically strong foreign insurers independently in India and to strengthen competition and innovation in the industry.
However, this increased freedom for foreign players will require amendments to operate rules to attract investments.
The current rules ban dividend distribution and most directors, major management personnel are required, and at least one as a chairman, managing director, or to be a resident of Indian citizen as Chief Executive Officer.
These sections will require amendment to align with proposed reforms and ensure easy implementation.
Shruti Ladwa, partner and insurance leader of EY India, said, “The 100% FDI proposed in insurance will attract foreign investments, promote innovation, and increase market competition, which can run high insurance penetration.”
He said, “Composite licenses will enable the insurers to provide comprehensive offerings, convenience of cross-cell opportunities, facilitate operations, reduce costs and improve consumer access and improve,” he said.
Ladwa said 100% FDI and composite licensing to deal with comprehensive challenges, reducing the requirements of capital for top/single-product insurers may accelerate the market entry and scalability, helping the insurers to reach the underscorce segment.
He said, “The specific product can empower the capital flexibility for the categories to provide an analog solution to the bottom-pyramid customers. However, it is important to maintain strong solvency standards through a risk-based capital (RBC) framework to ensure long-term financial stability and permanent growth.”
The amendment bill can introduce major changes, including the insurance agents permission to sell products from several companies.
Although it is expected to be introduced in the second part of the budget session, Finance Minister Nirmala Citerman can announce it during her budget speech.
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Expand the sector
Reduces entry to foreign re -assets by reducing the need for net owned money from the bill 5,000 crores 1,000 crores.
Additionally, it gives India’s Insurance Regulatory and Development Authority the right to specify the least entry capital to start at least. 50 crore, targets the understandable segment for micro and top insurers.
“A more favorable regulatory environment will run the expansion of the insurance sector and by 2047,” Saraf and Partners partner Adil Ladda said.
He said that the proposed reforms aims to increase insurance access and strength, modernize the industry and promote development.
To achieve this vision, Ladda emphasized the need for increased financial literacy, simplified rules, better claims processes, extended distribution networks and comprehensive coverage.
He said that the government’s proposed amendments have an important step towards realizing these objectives and strengthening the foundation for long -term development of the industry.
Capital requirements are unchanged for insurance and re -insurance 100 crores and 200 crores respectively, but the overall license introduces a high minimum capital limit 150 crores.
The bill also introduces the concept of captive insurers, enabling the group to create insurers for their internal business risks. Other changes include a difference solvency margin, alignment of insurance companies with banks on share-transfer approval, and the removal of the commission limit.
India’s general insurance market consists of four PSU institutions and 23 private players
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