The department of financial services (DFS) has said these amendments would enhance the financial security of policyholders, promote their interests, and improve their returns
New Delhi:
Revamping the existing regulatory frame work, the finance ministry has proposed scrapping of the statutory Rs 100 crore startup capital for life and general insurance business and Rs 200 crore for reinsurance business, allowing different kinds of insurers including captives, changing the investment provisions.
The Department of Financial Services(DFS) has proposed the issuance of one licence for all kinds of insurance for new as well as existing insurance companies. The composite licence will facilitate open access for insurers in any line of business. Such insurers will be allowed to enter any segment — life, health, general.
DFS has put out the proposed amendments to the Insurance Act 1938 and the Insurance Regulatory and Development Authority Act 1999 and has called for comments/ suggestions by Dec 15.
The government also proposes to allow an insurer to provide services related or incidental to insurance business and distribute other financial products as specified by and subject to regulations.
As per the proposals, the government is scrapping the provision of the Insurance Act that stipulates the minimum capital of Rs 100 crore for life, general, health insurance companies and Rs 200 crore for reinsurers.
In the place of statutory provision, the government proposes the sectoral regulator — Insurance Regulatory and Development Authority of India (IRDAI) — 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.
Kishor Kumar Poludasu, MD & CEO, SBI General Insurance, said, “In continuance of several other initiatives for improving insurance penetration, Insurance regulator IRDAI has approved a host of reforms such as allowing private equity funds to invest directly into insurance companies, allowing insurance companies to raise alternative investments and eased solvency margin for crop. These are welcome changes that will unlock further capital for insurers, make conducting insurance business easier, enhance distribution models, and promote customer-centered innovation among other things.”
These reforms will provide a further fillip to the regulator’s admirable objective of expanding the insurance sector to facilitate ‘insurance for all by 2047, he said.
“Where the insurer carries on business of more than one class or sub-class of insurance, [they] shall keep a separate account of all receipts and payments in respect of each such class or sub-class, as may be specified by the regulations,” the DFS said in the proposed amendments, which were released earlier this week.
The government has also proposed to reduce the amount of net owned funds required for an insurer to be registered to Rs 500 crore from Rs 5,000 crore.
The government has also proposed to give the IRDAI the power to specify the qualifications and experience necessary for appointment of an actuary by an insurer by regulations.
The IRDAI may, by regulations, specify the duties and powers of the actuary so appointed by the insurer.
The government has also proposed to stipulate the minimum amount of motor third party insurance policies to be underwritten by standalone motor insurance companies that may be set up.
The DFS has said these amendments would enhance the financial security of policyholders, promote their interests, and improve their returns.
Besides, they would facilitate the entry of more players in the insurance market, leading to economic growth and employment generation, the DFS said. It has invited comments from all stakeholders by December 15.
It has suggested that the two councils-General Insurance Council and Life Insurance Council-to have seven representatives elected in their individual capacity by firms that are members of the council; two eminent persons not connected to the insurance business, nominated by the regulator; three persons to represent insurance agents, intermediaries and policyholders, respectively; and, one representative of the central government.
Further, there will be one representative each from self-help groups and insurance co-operative societies.