The draft Insurance Laws (Amendment) Bill is likely to be tabled in the first session following the general elections.
The main changes for the insurance industry post the amendments is grant of composite licences to insurers. Under it, a single entity could offer both life and non-life products unlike now where these two businesses have to be carried by separate corporate entities. Composite insurers are also allowed in countries such as Singapore, Malaysia and the UK.
The Draft Bill proposes various changes such as opening up the Insurance and Regulatory Development Authority of India (Irdai) registration to various classes, subclasses and types of Insurers with minimum capital requirements.
The Draft Bill proposes to introduce various new definitions under the Insurance Act such as of ‘captive insurer’, and ‘class of insurance business’, as well as revise various existing definitions such as, ‘Indian Insurance Company’, ‘Insurer’ and ‘health insurance business’.
“Allowing Insurers to additionally perform services that are incidental or related to the insurance business as well as distribution of other financial products as well. Reducing the minimum capital requirement can dismantle entry barriers in the insurance sector, fostering industry growth and opening doors for smaller players to participate,” said Sharad Bajaj, chief operating officer (COO), InsuranceDekho.com.
The amendment proposes insurers to offer ancillary services related to insurance and distribute financial products as specified by the Irdai.
“The amendments in the Bill marks a significant milestone for the development of the Indian insurance sector in India. The provisions of the bill aligns with the government’s vision of achieving ‘Insurance for All’ by 2047,” said Sharat Dhall, Chief Operating Officer (COO), Policybazaar.
The draft bill suggests doing away with the existing requirement of paid-up equity capital of Rs 100 crore for setting up a life, general or health insurance business and Rs 200 crore for reinsurance businesses.
“Presently, for the transfer of an Insurer's shares exceeding one per cent of its paid-up equity capital, prior approval of the Irdai is required. This threshold is proposed to be relaxed to 5 per cent.
The new amendment enables a single insurance company to potentially engage in multiple classes or subclasses of insurance business, excluding reinsurance,” added Bajaj from InsuranceDekho.com
The new Insurance Law (Amendment) Bill, 2022 can be integrated with existing legislation by ensuring alignment with other relevant laws and regulations governing the Insurance sector.
“The integration of various laws may involve streamlining provisions related to policyholder interest, capital requirements, regulatory oversight and licensing procedures with existing frameworks of existing laws such as the Insurance Regulatory and Development Authority Act of 1999, the Insurance Act of 1938 and other similar laws,” said Ashish Goyal, Chief Financial Officer (CFO), Fibe.
