Insurers to be allowed to do certain other business, in addition to insurance business, enabling additional stream of revenue for insurers – like carrying of guarantee or indemnity business, managing and selling property possessed by company in satisfaction of claims, supporting entities formed for the benefit of employees or ex-employees or their dependents activities incidental to or conducive to advancement of the Insurance business – would also help insurers in conducting activities which promote insurance business
New Delhi:The finance ministry has proposed to amend various provisions of the Insurance Act, 1938, including raising foreign direct investment (FDI) in insurance sector to 100 per cent, reduction in paid-up capital, and provision for composite license.
According to an office memorandum dated November 26, 2024, it is proposed to amend certain provisions of insurance laws to ensure accessibility and affordability of insurance to citizens, foster expansion and development of the insurance industry, and streamline business processes.
The proposed amendments primarily focus on promoting policyholders’ interests, enhancing their financial security, facilitating entry of more players into the insurance market leading to economic growth and employment generation, the memorandum stated.
In this regard, a comprehensive review of the legislative framework governing the sector has been done in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and the industry, it said.
The Department of Financial Services (DFS) has sought public comments on the proposed amendments by December 10.
Such changes will help enhance efficiencies of the insurance industry, enabling ease of doing business and enhancing insurance penetration to achieve the goal of ‘Insurance for All by 2047’, it said.
Some of the key changes are-
-Composite registration allowing insurers to do life/general/health in single registration/insurance company – promotes operational efficiency for insurers having common brand across different lines of business,
-Foreign investment limits in Insurance sector proposed to be increased from 74% to 100% – welcome move could attract new foreign insurance Promoters/Investors,
-Insurers to be allowed to do certain other business, in addition to insurance business, enabling additional stream of revenue for insurers – like carrying of guarantee or indemnity business, managing and selling property possessed by company in satisfaction of claims, supporting entities formed for the benefit of employees or ex-employees or their dependents activities incidental to or conducive to advancement of the Insurance business – would also help insurers in conducting activities which promote insurance business,
-Requirement of minimum capital proposed to be reduced for class of insurers serving the underserved or special segment of population – to not less than Rs.50 crore (from existing Rs.100 crore) – intended to increase insurance penetration in rural areas,
-Minimum net owned funds for reinsurance companies operating in India proposed to be reduced from Rs.5,000 crore to Rs.1,000 crore – will increase reinsurance capacity in India,
-Insurance agents proposed to be allowed to work for more than one insurer in the same line of business – welcome move aimed at offering multiple insurance products by agents, promoting customer choice,
-Requirement of renewal of Certificate of registration of Insurance Intermediaries once every three years proposed to be removed – registration to be made perennial unless suspended or cancelled by IRDAI – removes the requirement of applying for renewal of Certificate of registration once every 3 years, only renewal fees to be paid – operational ease of doing business,
-Threshold Limit for prior IRDAI approval for nominal value of equity shares transferred, increased from 1% to 5% (prior approval for cumulative shareholding crossing 5% continues) – operational relaxation,
-Maximum penalty increased from Rs.1 lakh to Rs.5 lakh per day and the maximum monetary limit increased from Rs.1 crore to Rs.10 crore – Substantial increase in penalties for non-compliance,
-New provision on penalty for misstatement or furnishing false documents of not less than Rs.1 crore and upto Rs.5 crore, introduced – special penal provisions for treating intentional misstatements and wrong submission separately.
Comments, if any, to be provided to DFS at consultation-dfs@gov.in on or before 10 December 2024.