Government to introduce Insurance Act Amendment Bill in Budget session

The government is expected to introduce a bill amending the Insurance Act, 1938, during the upcoming Budget session to achieve the goal of 'Insurance for All by 2047'.

The proposed amendments could include provisions such as composite licenses, differential capital, reduced solvency norms, issuance of captive licenses, changes in investment regulations, one-time registration for intermediaries, and allowing insurers to distribute other financial products, sources said.

The move aims to allow differentiated insurance companies, similar to the categorisation in the banking sector, which includes universal banks, small finance banks, and payments banks. Composite licenses would enable 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 offer products like health, motor, fire, and marine insurance. The IRDAI does not permit composite licensing, meaning an insurance company cannot provide both life and non-life products as a single entity.

The draft bill is ready and awaiting Cabinet approval, sources added, with the finance ministry hoping for its introduction in the upcoming session.

The proposed amendments aim to enhance policyholders' interests, improve returns, facilitate the entry of more players for economic growth and job creation, increase operational and financial efficiencies in the insurance industry, and enable ease of doing business, sources said.

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 Insurance Regulatory and Development Authority of India (IRDAI).

Easing capital norms could allow the entry of companies focused on micro-insurance, agriculture insurance, or regional insurance firms. More players in the sector would not only boost penetration but also create jobs across India.

Currently, India has 25 life insurance companies and 32 non-life or general insurance firms, including the Agriculture Insurance Company of India Ltd and ECGC Limited.

(With PTI inputs)