The government is likely to put on hold the Insurance Laws (Amendment) Bill, 2022, following demands from the industry for major changes, including dropping the composite licence provision, which allows insurers to undertake general and health insurance via a single entity. The bill was expected to be introduced in the upcoming budget session.
The finance ministry last November invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory and Development Authority Act, 1999.
The General Insurance Council, a grouping of non-life insurers, has opposed the composite licence, warning that letting companies enter any segment will result in chaos and fragmentation of existing markets, an industry executive told.
“The council has argued that this will harm the interests of the existing policyholders in both life and non-life segments and that merging too many businesses might lead to issues in customer service and a lack of specialisation,” he said.
India has 24 general insurance companies, apart from some standalone health insurers. In the first nine months of FY23, total non-life premiums were up 16.2% to Rs 1.87 lakh crore.
Govt Examining Suggestions
Other industry stakeholders have sought clarification on the proposed amendments to Section 7A of the Insurance Act, which states that an “Indian insurance company” means an insurer that is a company, formed and registered under the Companies Act, 2013, as a public company. “We have sought clarity that these proposed changes will mean that the existing foreign investment limit of 74% will be done away with,” said another executive aware of developments.
A government official said that the suggestions are being examined and that an announcement can be made in the budget while the actual bill may be introduced later. “We will try to bring it in the first half of this (calendar) year,” he said.
The bill also proposed to remove the Rs 100 crore minimum paid-up equity capital requirement for life, general and health insurance businesses, as part of a significant revamp of the country’s insurance framework.
Inviting comments on the proposed amendments, the finance ministry had said the aim of the amendments was to enhance insurance industry efficiencies, operational as well as financial, and enable ease of doing business. “The proposal includes various measures such as opening up registration to various classes, sub-classes, and types of insurers with appropriate minimum capital requirements as specified by (sector regulator) IRDAI,” it had said. This is being done in view of the changing needs of the insurance sector, the ministry had said.
A review of the legislative framework governing the sector had been made in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and the industry, it said.
“A number of suggestions have been received to enhance insurance penetration, improve efficiency, and enable product innovation and diversification,” it had said.
